Taxes and NAFTA Under the Microscope
July 18, 2017
As the White House looks to renegotiate NAFTA, the GOP is looking towards tax reform, now that healthcare reform has collapsed. Homebuilding sentiment and trade prices are also down.
- White House releases plans for remaking NAFTA. The Trump administration announced its plan for remaking the North American Free Trade Agreement to preserve “Buy America” provisions and to reduce trade deficits while easing back on the inflammatory campaign rhetoric on trade with Mexico and Canada. The plan consists of provisions for reducing the trade deficit with NAFTA countries while maintaining rules that favor U.S. firms in government procurement. The plan also includes an unspecified mechanism to prevent countries from manipulating their currencies for trade advantage. Mexico and Canada both are open to the idea of reworking the trade agreement, however, Democratic lawmakers argue that the blueprint is too vague and could further strain U.S. relations with Canada and Mexico. [WSJ]
- House Republicans plan to rewrite tax codes. The overarching plan would aim to rewrite current tax law, revamp medical malpractice laws, change federal employees’ retirement benefits, and repeal some of the Dodd-Frank financial regulations. This all be in one bill would not require any Democratic votes to pass the House. The committee’s fiscal blueprint aims for a $6.5 trillion deficit reduction over the next ten years with a forecasted 2.6% average annual economic growth. The biggest impact of the bill is to set the stage for future reconciliation. The tax plan itself aims to be deficit-neutral, partly paying for itself with revenues from stronger growth in the economy. However, before the tax bill can advance, the House and the Senate must agree on the same version of the budget and the date has yet to be released. [WSJ]
Economic Indicators & News
- Homebuilder sentiment in U.S. declines to an eight-month low. These heavy declines are due to concerns of higher material costs. The Builders’ Housing Market Index decreased to 64 from 66 in June and measures of six-month sales outlook dropped to a five-month low of 73 from 75. Index of current sales fell to 70, the weakest since November. Builders are faced with a tough choice when dealing with high material costs, either raising home prices or absorbing the additional expense. While demand does remain steady, increasing prices on new homes risks putting some properties out of reach. [Bloomberg]
- U.S. import and export prices decline in June. U.S. import prices fell as predicted in June, while export prices unexpectedly declined. The U.S. Bureau of Labor Statistics stated that import prices decreased by a seasonally adjusted 0.2% in the last month. Export prices, however, unexpectedly dropped by a seasonally adjusted 0.2% in the previous month, while forecast predicted no change. The U.S. dollar index was at 94.50 compared to 94.48 before the report was released. U.S. stock futures pointed to a lower opening with the Dow and the S&P 500 edging downwards. In the commodities market, gold futures traded at $1,238.26 a troy ounce versus $1,238.96 before the data was released, and crude oil traded at $46.73 a barrel, down from $46.78. [Nasdaq]