Canada expect Trump will pull out of NAFTA

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11 Jan, 2018

Canada expect Trump will pull out of NAFTA

Just as Donald Trump withdrew the US from the Trans-Pacific Partnership (TPP), Canada are becoming increasingly convinced that the President will pull the US out of NAFTA, Reuters reports.

He once described it as the “worst deal ever signed in the US” and was well on his way towards scrapping the North American Free Trade Agreement (NAFTA) following his ascension to the Oval Office.

He bemoans the sheer lack of tariff restrictions that accompanies the deal and has criticised US car manufacturers that build vehicles in Mexico to sell back into the US with little to no taxation in between.

Although, since then, Trump has agreed to revamping NAFTA via a series of negotiations which first started in August 2017. However, talks have been painstakingly slow with several roadblocks along the way.

During the fifth round of talks, both Canada and Mexico outright rejected US proposals for changes in auto manufacturing processes between the nations whilst they also refused to offer any counterproposals with one Mexican auto industry representative saying: “You cannot counter-propose such madness”.
The proposals consisted of increasing the number of vehicles and auto parts produced in the tariff-free North American region from 62.5% to 82%. Furthermore, Trump wants the US to obtain a lion’s share of this new proposed deal, with 50% of the manufacturing coming from the US.

Now, the sixth and penultimate round of talks due to take place in Montreal between 23-28 January. With no breakthrough in sight, the notion of Trump scrapping the agreement entirely becomes a real reality and markets have already been impacted.

Major stock indexes in Wall Street ended lower on Wednesday, whilst the Canadian dollar weakened to its lowest this year against the greenback as the uncertainty surrounding talks tempered bets that the Bank of Canada will raise interest rates next week, Reuters reports. The Mexican peso was also on the backfoot whilst stocks extended losses.

Royal Bank of Canada’s Chief Executive Dave McKay said on Tuesday he believed there was now a greater chance that NAFTA could be scrapped.

“The government is increasingly sure about this ... it is now planning for Trump to announce a withdrawal,” one of the sources, who asked to remain anonymous because of the sensitivity of the situation, said.

Although, if Trump where to give the six-month notice to scrap NAFTA, he is likely to meet opposition from Congress via the Senate and or House of Representatives, which could further complicate matters.
Talks are due to be concluded by the end of March.

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