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As I wrote in my weekly global markets summary last week, the 12-country trade deal, known as the Trans Pacific Partnership (TPP), finally reached agreement last week in Atlanta. The big players include the U.S., Japan, Canada, and Australia, and the biggest impact from the deal stems from the multilateral agreements with developing economies in Asia, like Vietnam, Singapore, and Malaysia. Ultimately, the TPP will apply to 40% of the world’s economy and, for American exporters alone, 18,000 individual tariffs will be reduced to zero.

Sounds great on paper, but there are still questions and concerns about the deal in the U.S, and most of them are political. As far as this column is concerned, we want to concern ourselves with what the market impact could be and what the longer term economic implications are. Examining both can influence what sectors and industries may come into favor as a result.

3 Key TPP Insights

The TPP agreement has 30 chapters in it so far, so to dig into granular details about trading policies for Canadian dairy or Japanese beef would be onerous and beside the point. The four key takeaways below describe what the deal really signifies for the U.S., the global economy, and stocks.

1. For Th U.S., the TPP is More about Strategic Posturing than Trade –the U.S. is the big “spear-header” in this deal, but interestingly the tariff reductions involved are fairly insignificant – we already have a few deals on the books with several member countries. Our real motivation stems from two sources in my view:First is America’s (warranted) desire to keep a foothold in Asia, where China is increasingly flexing its muscles in setting policy. Two examples of China’s power grab are the Asian Infrastructure Bank (in which the U.S. is not involved) and their territorial claims in the South China Sea. China wants to be the gatekeeper and controller of dealings in Asia, and the U.S. would be wise to find a means to stay influential – hence the TPP.

   The second reason is related to the first, again having to do with China. The thinking is, if we can get this deal on the books and start to have legitimate economic influence in the Asia region, then China will ultimately back its way into the deal. The ideal outcome, in my opinion, is to create an agreement that has the U.S. and China working together to be the ‘honchos’ of all things economic in the Asia-Pacific region. That would give us the ability to share the throne, so to speak, that China is currently gunning for.

2. Services Matter More Than Goods – unfortunately, manufacturing jobs have been on the decline for some time in the U.S. and many of those jobs aren’t coming back – either because they’ve been exported or because technology has replaced them. But, that’s not entirely a bad thing. We are a service and consumption-based economy now, and Asia is a massive frontier of possibilities for services like banking, telecommunications, health care, and technology. The TPP could offer service providers in the U.S. less prohibitive access to these markets, and stocks in those sectors could benefit from more open doors.

3. Politics Might Make the Whole Thing Moot – both the far right and the far left staunchly oppose this deal, and ‘trade’ is typically an easy topic to bash on the campaign trail (rhetoric about losing jobs). Congress has 90 days to vote on the TPP and, with the presidential campaign in full swing, it seems likely that many members of both parties will be too skittish to support it. I doubt it will pass. What we could see happen is a similar evolution as what occurred with NAFTA. In that deal, President Bill Clinton ultimately signed a deal negotiated by George Bush senior. Maybe the TPP gains traction in 2017.

Bottom Line for Investors

For all the fanfare about the deal, the reality is that the reached agreement still has big hurdles to jump before it’s activated. It has to clear all 12-member countries’ governments, and that could take years. For now, investors should shelve the story and watch from a distance how it unfolds.

If a deal gets done, there could be material investment opportunities for industries that can operate more freely in the Asian-Pacific. Additionally, it could notably drive global growth if the U.S. and China work together for regional stability and emphasize commerce. It never hurts to keep your eye on longer-term macro developments, and this is certainly one of them.

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