New NAFTA Doesn't Change Expectation That Fight With China Will 'Get Worse Before It Gets Better,' Merrill Lynch Says
The U.S.-Mexico-Canada Agreement could lead to further escalation of the trade dispute with China, said Ethan Harris, global economist at Bank of America Merrill Lynch, in a research report. "The completion of the NAFTA deal does not alter our view…
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that the US-China trade 'war' will get worse before it gets better," he said. "We see the NAFTA deal as part of an attempt by the US to marshal its forces with China," he said. There are political considerations at play too, and the Trump administration could "dial back its demands" for China in order to show a "win" that might help Republicans in the midterm elections, he said. At the same time, China is aware of this dynamic and "would like to see if President Trump’s negotiating position is weakened by the midterms," he said.