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Mark Pent: Why should Wisconsin care about the USMCA?

by Richard Surek / Saturday, 23 November 2019 / Published in Dane County Real Estate News

Vice President Mike Pence recently visited Wisconsin to push the trilateral trade agreement known as the U.S.-Mexico-Canada Agreement (USMCA). It was the fourth time Pence or President Donald Trump have visited the Badger State since May to highlight the USMCA — a sign of how important the administration views the deal to the economy and the 2020 election.

But for a deal that’s becoming a political football, why should Wisconsin care? What’s the real dollars-and-cents impact on our economy and your wallet?

To start, it helps to recognize that while the media coverage on trade heavily focuses on the U.S.-China trade relationship, our relationships with our neighbors to the north and south matter much more to the U.S. economy.

According to the U.S. Trade Representative, the two-way trade of goods between U.S. and China accounts for about $660 billion (2018), while our trade relationship with Mexico and Canada was closer to $1.23 trillion in the same year.

Sure, that’s one country versus two, but we have a history of trade agreements with Mexico and Canada — whereas no such ongoing cooperation exists with China. Historically, there’s more trust between our North American trading bloc than with China, which has a well-documented bad habit of intellectual property infringements and currency manipulation.

So while the ongoing China-U.S trade dynamic continues to play out, ensuring a productive trading relationship with Mexico and Canada may be more valuable to the U.S. economy, and, most certainly, for the Wisconsin economy — but, more to come on that in a bit.

As I noted, it’s important to consider that Mexico and Canada are our most significant trading allies. It also should be said that uncertainty around the USMCA — and any trade deal, for that matter — could have a real-life impact on the markets and, in turn, our own personal investments and savings.

Economist Steve Davis — who has analyzed the impact of trade uncertainty and economic reaction — noted that trade policy has evolved from a “virtual nonfactor in U.S. equity-market volatility in recent decades to one of its leading sources in 2018.” The more people and businesses worry about trade, the more it can potentially hurt the economy and your investments. The very act of finalizing the USMCA will likely help the markets, in addition to the estimated $62.2 billion in increased real GDP that’s expected.

But what about Wisconsin? Why should we care? The answer is even more clear-cut than with the U.S. economy overall.

While China as an individual country is the leading trade partner with the U.S., that’s not the case with Wisconsin. In fact, China accounts for less than 10% of Wisconsin’s export market. On the other hand, Mexico and Canada account for over 45% of Wisconsin’s exports, and it’s estimated those two countries alone support over 230,000 Wisconsin jobs.

Pence and Trump clearly understand that Wisconsin is impacted by U.S.-Mexico-Canada trade relations, and it’s clear the markets and our own personal economies are impacted. Now, that’s not to say the entire plan is a panacea, but understanding the importance of how policies like trade deals impact your own personal finances is an important part of planning for your future.

Mark Pent is the branch director at Annex Wealth Management’s Madison office.

Share your opinion on this topic by sending a letter to the editor to tctvoice@madison.com. Include your full name, hometown and phone number. Your name and town will be published. The phone number is for verification purposes only. Please keep your letter to 250 words or less.


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