The new U.S.-Mexico trade deal announced Monday could put Donald Trump in a good position to dig in his heels on trade with China.
Analysts say the new trade deal will score political points for Trump and the Republican party ahead of the upcoming midterms. That gives the administration more leeway for to take a hard line with China, even though the U.S.-China trade war has been bad for business on both sides of the Pacific.
Moreover, the demonstration that the U.S. can be a good-faith negotiator means the Trump administration is unlikely to back down from its position on China until the Chinese government can come to the table having met some of the Americans’ demands. Until then, they said, we’re likely to follow a familiar pattern of tariff escalation and retaliation.
Trump had already escalated the trade war with China before making a deal with Mexico. In early August his administration threatened to impose a 25% tariff on an additional $200 billion in goods, a significant increase over the 10% tariff originally threatened on the same value of goods. Moreover, it now seems the U.S. is looking for structural reforms from China rather than simple trade balancing, a demand on which China isn’t likely to budge.
Canada has yet to sign on to the new deal between the U.S. and Mexico, which experts have said could spell the end of NAFTA.