Will the U.S. enact a free trade agreement with China?
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Will the U.S. enact a free trade agreement with China?
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AI Analysis
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About This Event
During his term If a free trade agreement with China has become law, either through Senate ratification and Presidential approval or through Congressional-Executive Agreement and the signature of the President (or at least, signing the implementing legislation) after Issuance before January 20, 2029, then the market resolves to Yes. Early close condition: This market will close and expire early if the event occurs. This market will close and expire early if the event occurs.
Current Market Outlook
Kalshi traders see a 45% chance that the U.S. will enact a new free trade agreement before January 20, 2029. That is effectively a coin flip. The market is not pricing in confidence that Trump will strike new trade deals, nor is it ruling them out. A 45% probability means traders see more reasons to doubt than to believe, but the gap is small enough that a single policy shift could flip the odds.
Key Factors Driving the Odds
Trump’s first term trade record is the anchor here. He signed the USMCA to replace NAFTA, but that was a renegotiation, not a new agreement with a new country. He withdrew from the Trans-Pacific Partnership and imposed tariffs on China, the EU, and allies. His 2024 platform calls for a 10% universal tariff and a 60% tariff on Chinese goods. Those positions are fundamentally hostile to free trade agreements, which require lowering barriers.
The market is also pricing in the mechanics of passage. Any trade deal needs either two-thirds Senate approval for a treaty or majority votes in both chambers for a Congressional-Executive Agreement. Republicans hold narrow majorities. Even if Trump wanted a deal, getting it through a Congress where protectionist sentiment has grown on both sides is a heavy lift.
What Could Change These Odds
A specific bilateral negotiation with the UK or India could move the market. The UK has pushed for a post-Brexit trade deal with the U.S. for years. If Trump signals serious talks, expect the probability to jump above 60%. Conversely, if Trump imposes new tariffs early in his term, the odds should drop toward 30% or lower, because that pattern would signal he is doubling down on protectionism.
The market likely underweights the possibility of a small, symbolic agreement with a country like Kenya or Ecuador. Those would be low-stakes deals that could satisfy Trump’s desire for a win without triggering major political blowback. If that scenario gains traction, the 45% figure looks too low.
AI-generated analysis based on market data. Not financial advice.
Overview
A free trade agreement (FTA) is a treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers on goods and services exchanged between them. The United States currently has 14 FTAs in force with 20 countries, including major partners like Canada, Mexico (USMCA), South Korea, Australia, and Israel. The question of whether the U.S. will enact a new FTA during a given presidential term depends on the administration's trade policy priorities, congressional dynamics, and geopolitical factors. During his term, President Joe Biden has not pursued traditional comprehensive FTAs, instead focusing on the Indo-Pacific Economic Framework (IPEF), a non-tariff agreement that does not include market access commitments. This approach reflects a shift from the Trump administration's protectionist stance and the earlier bipartisan consensus in favor of trade liberalization. Interest in this topic is driven by ongoing debates about globalization, supply chain resilience, and the U.S. economic competition with China. Many economists argue that new FTAs could boost U.S. exports and economic growth, while critics raise concerns about job losses and environmental standards. The probability of a new FTA being enacted depends on whether the administration or Congress prioritizes such deals and whether they can secure the necessary legislative approval.
Historical Context
The United States has a long history of negotiating free trade agreements, beginning with the U.S.-Israel Free Trade Agreement in 1985. The North American Free Trade Agreement (NAFTA), signed in 1994, was a landmark deal that eliminated most tariffs between the U.S., Canada, and Mexico. NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020, which updated rules on digital trade, automobiles, and labor standards. The U.S. also signed FTAs with Jordan (2001), Chile (2004), Singapore (2004), Australia (2005), Morocco (2006), Bahrain (2006), Oman (2009), Peru (2009), Colombia (2012), Panama (2012), and South Korea (2012). The Trans-Pacific Partnership (TPP), a 12-country agreement negotiated under President Obama, was signed in 2016 but never ratified by the U.S. Senate. President Trump withdrew from the TPP in 2017 and renegotiated NAFTA, while also imposing tariffs on steel, aluminum, and Chinese goods. The Biden administration has continued many Trump-era tariffs and has not pursued new FTAs, breaking with the bipartisan tradition of trade liberalization that lasted from the 1980s through the early 2010s. The last U.S. FTA to be enacted was the USMCA in 2020.
Why It Matters
The enactment of a new free trade agreement would have significant economic implications. According to the Peterson Institute for International Economics, an FTA with the United Kingdom could increase U.S. GDP by 0.1% to 0.2% and boost bilateral trade by 20% to 30%. An FTA with Kenya, which the U.S. began negotiations with in 2020, could support U.S. exports in agriculture, machinery, and services. Trade agreements also affect jobs: the USMCA was projected to create 176,000 U.S. jobs, though critics argue that past FTAs have contributed to manufacturing job losses in the Rust Belt. Beyond economics, FTAs serve as geopolitical tools, strengthening alliances and countering China's influence through initiatives like the Belt and Road Initiative. An FTA with Taiwan, for example, could signal U.S. commitment to the region. Politically, trade agreements are contentious, dividing Democrats over labor and environmental standards and Republicans over free market principles. The outcome of this question will shape U.S. trade policy for years, affecting consumers through prices, workers through job displacement, and businesses through market access.
Current Status
As of early 2025, no new free trade agreement has been enacted during President Biden's term. The administration has pursued the Indo-Pacific Economic Framework (IPEF), which includes 14 countries but does not provide tariff reductions or market access. Negotiations with Kenya for a bilateral FTA, initiated under Trump, have stalled. The U.S. has also engaged in trade discussions with Taiwan, but these have not resulted in a formal agreement. Congress has not taken up any new FTA legislation. The Biden administration's focus has been on enforcing existing agreements, such as the USMCA, and using tariff policy to protect domestic industries. The likelihood of a new FTA before January 2029 appears low, given the political climate and administration priorities.
Frequently Asked Questions
What is a free trade agreement?
A free trade agreement is a treaty between countries that reduces or eliminates tariffs, quotas, and other barriers to trade in goods and services. It also often includes provisions on intellectual property, investment, and labor and environmental standards.
How many free trade agreements does the US have?
The United States has 14 free trade agreements in force with 20 countries. These include major deals like USMCA (with Canada and Mexico) and agreements with South Korea, Australia, Israel, and others.
Why hasn't the US signed a new free trade agreement recently?
The Biden administration has prioritized domestic manufacturing, worker protections, and supply chain resilience over new trade deals. Political divisions in Congress and skepticism about past FTAs have also slowed progress.
What is the difference between a free trade agreement and a trade framework like IPEF?
A free trade agreement provides legally binding commitments to reduce tariffs and open markets. A trade framework like the Indo-Pacific Economic Framework (IPEF) focuses on non-tariff issues like digital trade, supply chains, and clean energy, without providing market access.
Could the US enact a free trade agreement with the UK?
Negotiations for a U.S.-UK FTA began after Brexit but have stalled. Both sides have expressed interest, but disagreements over agricultural standards, food safety, and digital trade have prevented progress. The Biden administration has deprioritized the deal.
How does Congress approve a free trade agreement?
Free trade agreements can be approved through Senate ratification (requiring a two-thirds majority) or through a Congressional-Executive Agreement, which requires a majority vote in both the House and Senate. The latter is the more common method for modern FTAs.
Educational content is AI-generated and sourced from Wikipedia. It should not be considered financial advice.
