Canada’s auto stocks spike after U.S., Mexico announce trade agreement

Canada’s auto stocks spike after U.S., Mexico announce trade agreement

Canada’s auto stocks spike after U.S., Mexico announce trade agreement

The 24-year-old NAFTA is a trilateral deal between the United States, Canada and Mexico that underpins $1.2 trillion in North American Trade.

Canada, which sat out the last leg of discussions while the United States and Mexico ironed out their bilateral differences, is now pressured to agree to the new terms on auto trade and other issues to remain part of the three-nation pact.

After the deal with Mexico was announced, Canada's Prime Minister Justin Trudeau spoke on the phone with President Trump. "And now it's a really good deal for both countries, and we look very much forward to it".

"(It) is definitely good news for Mexico and the U.S., but could be good or very bad for Canada", Capital Economics Chief U.S. Economist Paul Ashworth wrote in a note to clients on Monday afternoon.

"The Canadians really ought to look at what the us and Mexico just completed as an example of what can be done if there is good faith negotiating and a willingness to compromise in the interest of both parties".

Analysts at ANZ Bank New Zealand, (ANZ), explained that the United States and Mexico have reached a trade agreement that will replace a soon-to-be-terminated NAFTA bill, according to both Presidents in a joint announcement. "Canada will probably have to sign on to the rest, or risk much worse arrangements with the United States outside of a trade agreement", he went on. They said a "trade war" would be self-defeating.

"Enrique?" Trump said into the speakerphone, as pool cameras whirred in front of him.

The preliminary agreement with Mexico includes an option to renegotiate in six years and extend for an additional 16 years.

The planned call did not go off without a hitch, though, when Trump was stuck behind his Oval Office desk pressing buttons on the console in an attempt to connect with Neito - to no avail - for well more than a minute.

But Canada is likely to object to revisions in Nafta that include rules that will make it harder for treaty members to challenge USA trade penalties.

Auto stocks soared and the S&P 500 and the Nasdaq rallied to record highs on the expectation that Canada would sign onto the deal and ease the economic uncertainty caused by US President Donald Trump's repeated threats to ditch the 1994 accord.

U.S. President Donald Trump threatened he still could put tariffs on Canadian-made cars and demanded concessions on Canada's dairy protections. It would also require 40% to 45% of the vehicle to be made by workers earning at least $16 an hour.

Canadian Foreign Minister Chrystia Freeland will travel to Washington, D.C., on Tuesday for negotiations.

Senior administration officials told reporters that the goal is to send a formal notification of the renegotiation to Congress on Friday, kicking off the clock for lawmakers to support or reject the new deal.

To break up the current three-country trade agreement, Trump would need approval from Congress, something he is unlikely to get. "Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement".

"We will only sign a new NAFTA that is good for Canada and good for the middle class", he said, adding that "Canada's signature is required". "Peña Nieto promised Trump, who doesn't drink, a tequila toast", and Trump concluded by saying he'd just sealed a deal with Canada.

A major part of the agreement surrounds import taxes on cars.

Mexico's incoming president-elect Andrés Manuel López Obrador, who takes office in December, has been critical of the energy reform and has vowed to review the contracts that foreign firms have already signed with Mexico.

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