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August 27, 2018 | Trump Announces Deal with Mexico, “We’ll See” About Canada

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
“Big deal looking good,” says trump as he drops the name NAFTA due to “bad connotations”.

President Trump said he had reached an agreement with Mexico to rewrite portions of the quarter-century-old North American Free Trade Agreement and threatened to remove Canada from the three-country accord if Ottawa failed to make concessions.

Mr. Trump said the agreement should be renamed the U.S. Mexico Free Trade Agreement, dropping the Nafta name because it had “bad connotations” for the U.S. It wasn’t immediately clear if the Mexicans—let alone the Canadians—would agree to any renaming of the regional trade pact.

The core of the deal with Mexico overhauls rules for building cars across the continent, aimed at ensuring a greater portion of the vehicles are built in the region, and more locally-produced steel is used. The accord also has new provisions aimed at raising wages and offering new rights to Mexican labor unions. Those measures are aimed longstanding complaints by U.S. Nafta critics that American workers have been hurt by having to compete with cheaper labor across the border.

The U.S. side said the deal would also beef up regional content requirements for chemicals, steel intensive products and other industrial materials. The U.S. side also touted moves to strengthen rules governing supply chains in the textile and apparel industries.

President Trump dialed the Mexican President Enrique Peña Nieto on the Oval Office speaker phone, and congratulated him on the deal. Mr. Nieto responded, in part, by saying he hoped Canada would remain part of the agreement.

Nebulous Details

The devil is in the details, and we have scant few of them.

One thing we do know is the Mexican president pushed for higher minimum wages so that would have happened anyway.

Whatever the deal is, Mexico will not be paying for the Wall. That aside, trade is a good thing, so any deal is better than no deal.

Mexico will start buying US soybeans again, and the US will resume buying cars made in Mexico. We are essentially back to where we were, with a few little extras throne in.

Why We Can’t Call It NAFTA

This is all pretty nebulous but the essence of this deal could have been made without all the brouhaha.

Meanwhile, please don’t call it NAFTA due to “bad connotations”.

Mike “Mish” Shedlock

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August 27th, 2018

Posted In: Mish Talk

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