USMCA will have a minimal impact on economic growth: Harvard economist
USMCA will be beneficial to Mexico, but its effects on the US will be 'pretty marginal'
USMCA appears destined to pass through the Senate, but one economist is skeptical of the impact it will actually have.
“Certainly it is not going to have a big effect on our growth at all,” Harvard economist and former IMF chief economist Kenneth Rogoff told FOX Business’ Maria Bartiromo.
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He argued that the agreement is much more beneficial to Mexico than it is to the United States where the effects will be “pretty marginal.” The agreement has some good points, such as its new environmental standards, however, its restrictions on manufacturing imports are “counterproductive,” according to Rogoff.
President Donald Trump, Canada's Prime Minister Justin Trudeau, right, and Mexico's President Enrique Pena Nieto, left, participate in the USMCA signing ceremony, Friday, Nov. 30, 2018 in Buenos Aires, Argentina. (AP Photo/Pablo Martinez Monsivais)
The economist suggested that 3 percent GDP growth is possible in 2020, however, growth just above 2 percent is the more likely scenario at the moment.
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“Unless something really traumatic happens, it’s actually not that great, but obviously, if Iran, you know, does something to block oil shipments from the Middle East, that would have a striking effect if the U.S. were suddenly to be thrown into a war,” Rogoff said in response to concerns that rising tensions in Iran could lead to economic hardship.
He indicated that the election of Elizabeth Warren or Bernie Sanders could have a severe negative initial impact on the markets, however, growth might not necessarily go down. Policies proposed by Senators Warren and Sanders could boost the economy in the short term by boosting aggregate spending as a result of putting more money in the hands of people who spend more, Rogoff argued.
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“The question is, what’s sustainable? And that’s I think the big issue. If we shifted to a completely different regime, I think a lot of the policies that Warren and Sanders have said, in the short run, might well boost the economy, but I’m not sure how good they’d be for long-run productivity,” he said.
Rogoff also suggested that the sheer fact of Congress passing a trade deal is cause to be optimistic about future deals and is positive for the national psychology.