NAFTA Saga Continues as Investors Stay Wary

- May 7th, 2018

As American, Mexican and Canadian government officials meet in Washington for NAFTA negotiations, investors are watching in anticipation from the sidelines.

As negotiators from Canada, Mexico and the US meet in Washington this week in hopes of reaching a consensus on the North American Free Trade Agreement (NAFTA), tensions run high as key deadlines quickly approach.

Despite over eight months of conversation and negotiation around NAFTA, many issues between the three nations are still unresolved. One of the issues goes hand-in-hand with the looming threat of June 1, which is the day steel and aluminum tariff exemptions to Canada and Mexico will expire.

While its original deadline was May 1, US President Donald Trump extended the exemptions for America’s NAFTA companions in hopes that the two countries would agree on a quota for steel and aluminum exports, similarly to the deal South Korea accepted with the US. However, both countries vocalized their opposition to the idea, and have shown no signs of backing down.

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“We are really committed to doing whatever it takes to get a good win-win result,” Canadian foreign affairs minister Chrystia Freeland told reporters during a Saturday conference call. “I am not going to prejudge the outcome of the talks.”

Other deadlines affecting NAFTA are July 1, which represents Mexico’s federal election day, an event that could delay the talks even further. A few months after that, the US will see fall midterm elections, another political push that stands to drag NAFTA negotiations into 2019.

Government officials aren’t the only ones hoping for a speedy resolution to the NAFTA situation; as economists watch from the sidelines, uncertainty has hovered over the investment space like a dark cloud.

“Oh well, goodness, I think the biggest problem is with private investment,” Pedro Antunes, deputy chief economist for the Conference Board of Canada told CBC.

“The uncertainty for businesses about whether they will have access to the North American market has played out a big role in holding back private investment intentions.”

Antunes went on to say that even a preliminary NAFTA agreement-in-principle would help restore some investors’ confidence.

“An agreement-in-principle is simply an agreement to agree later on,” he said. “It doesn’t provide a whole lot of certainty. But I think what it will provide is some certainty that things won’t change for the next little while, and I hope that would be positive for investors.”

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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