NAFTA Update – Have US Negotiations Progressed?
16 August 2018It’s been one year since the trade renegotiations on the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico began. Since then we have seen tough rhetoric on how the agreement should look like moving forward from each country, especially the United States. But are we finally getting closer to an agreement?
About NAFTA
The North American Trade Agreement (NAFTA) came into effect on 1st January 1994 and it formed one of the World’s largest free trade zones and laid down the foundations for a strong economic growth for the United States, Canada, and Mexico. However, in recent years the agreement has come under a lot of scrutiny from the US, with President Trump calling it “the worst trade deal ever made”, which has led to renegotiations between the three nations.
Latest developments
It appears that the negotiations between the US and Mexico have been going well, with both reportedly close to agreeing on a deal in their talks to revise the NAFTA deal. However, Canada has not been part of the latest part of the discussions.
“Right now, it appears they are getting incredibly close to finishing the discussions between the U.S. and Mexico,” said Inu Manak, who has monitored the talks for the Cato Institute, a libertarian think tank in Washington.
Even though the talks between the US and Mexico are going well, there will be no final deal on NAFTA unless Canada agrees to re-join the renegotiations. In a recent tweet, Donald Trump praised the new President of Mexico, however, he had a dig at Canada’s tariffs and trade barriers, threatening to tax Canadian made cars if they cannot make a deal.
In response to the President Trumps tweet, Canada Foreign Affairs Minister Chrystia Freeland said that they will not change the course of the renegotiations.
“Our focus is unchanged,” Adam Austen, a press secretary for Canada Foreign Affairs wrote in an email. “We’ll keep standing up for Canadian interests as we work toward a modernized trilateral NAFTA agreement.”
Both US and Mexico are working hard to get a deal signed by the Mexican President Enrique Pena Nieto before he departs office on 1st December to give way to the President-elect Andres Manuel Lopez Obrador. The Canadian negotiating team have been on the sidelines in the recent part of discussions but are expected to join the negotiation table soon. However, the Mexican Economy Secretary Ildefonso Guajardo said that there are currently no timeframe for when the Canadian counterparts will join the discussions. “We have to make sure that the U.S.-Mexico bilaterals are done,” Guajardo said, adding that Canadian Foreign Minister Chrystia Freeland will “hopefully” be a part of the discussions soon.
Financial markets
The US Dollar has strengthened by around 5% since the beginning of the year against the Canadian Dollar, currently trading at around 1.31 level. However, it has weakened by around 1.2% against the Mexican Peso. Currently trading at around 19.18 level. Further developments in the talks will certainly have an impact on the financial markets moving forward.
USDCAD – Daily Chart
USDMXN – Daily Chart
Klāvs Valters
Market Analyst
Sources: Go Markets MT4, Twitter
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