In 2020, the United States-Mexico-Canada Trade Agreement (USMCA) was introduced to replace the North American Free Trade Agreement (NAFTA). There had been disagreement over the benefits of the NAFTA, which had been in place since 1994, as many were skeptical over the supposed advantages the NAFTA brought to US trade and instead suggested that it actually was to blame for inflation and trade deficits. The USMCA was brought it to hopefully improve on the NAFTA and establish strong trade relationships between the US, Mexico, and Canada.
We look at the first impressions of the USMCA since being instated two years ago and discuss whether it is boosting the US economy during a troubled economic time for the entire world.
Stronger trade relationships with the USMCA?
Replacing the NAFTA with the USMCA was intended to bring benefits to all parties involved. It was suggested that numerous industries including agriculture and trade would benefit from fairer trade and freer markets. The USMCA was also designed to support economic growth in the US, Mexico, and Canada. Additionally, those who advocated the new trade agreement believe that it would generate well-paying jobs and straighten the middle class in North America, promises that carry a great deal of weight in today’s economic climate.
If successful, the trade deal will foster healthy trade relationships between all three countries, which, in theory, should help to boost the US economy.
With a potential recession on the horizon, the US economy could benefit from USMCA
The latest news reports predict that the US is heading towards a recession and will probably reach it by the end of 2022. According to recent reports, the health of the US economy dropped by 0.7% in June and 0.4% in July.
The country’s gross domestic product (GDP) fell for two consecutive quarters, and its economy shrank by 1.6% between January to March, and by 0.9% from April to June this year. This decline in economic growth for two quarters meets the unofficial criteria for a recession but the National Bureau of Economic Research has recently stated that they rely on more than GDP data to define a recession.
At this time, legislation that facilitates trade between the US and two of its key trading partners is vitally important for holding off a recession.
What are the initial reactions towards the USMCA?
Shortly after the USMCA came into effect, key players in the North American trucking industry came together to discuss their initial impressions of the trade deal. Overall, their feedback was positive, and there was a sense of hope that the agreement would be beneficial to US trucking operations. Additionally, the growing commercial tension between the US and China was reflected on, with experts suggesting that as a result of this, manufacturing and production may increase in North America. With the USMCA in place, this increased economic activity may be supported and allowed to flourish.
Overall, it is too soon to conclusively say if the USMCA has effectively boosted the US economy. However, as it stands, initial feedback has been generally positive and there are many signs that the slowing economy in the US may be protected at least to some extent by the USMCA.
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