Trump, Trade, and the Canadian Dollar


Trump threatens Canada with “the ruination of the economy”

 

While Canada’s chief NAFTA negotiator, Chrystia Freeland, and the US negotiator, Robert Lighthizer, left the talks on Friday without a resolution, the US President continued his approach of make threats today, then put a positive spin on things when he eases back pressure tomorrow.  Trump had originally placed a deadline of last Friday, or he would slap large tariffs on auto exports, leading to his comments on economic ruination.  For now, at least, he has not followed through on the threats. 

 

While Freeland has been consistent in her rhetoric that a new trade deal has to be one which is good for Canada, and has expressed, and continues to express belief that everyone at the table wants to achieve a solution that works for all three countries, the Canadian Prime Minister finally weighed in last week with his strongest words to date.  “We will not be pushed into accepting any old deal, and no deal might very well be better for Canada than a bad deal” he said while speaking at the University of Chicago last week. 

 

The key elements that remain as sticking points in the negotiations are;

 

 

Trudeau has said he will not agree to any agreement that does not contain the Chapter 19 dispute resolution mechanism.

 

 

So where are we now? 

 

Trump has signalled to Congress that he intends to enter a new trade deal with Mexico.  The rules state that he must give 90 days notice on any new trade deals, and with Mexican President Pena Niento leaving office on Dec. 1st, Trump had to get that to Congress by Aug. 31st.

 

Both Trump and Trudeau are now looking towards their own elections, and you can bet that settling this trade issue will be a top priority for both.  Trump wants to be able to point to his Negotiator-in-Chief status, and Trudeau’s re-election may rest on his ability to get through this NAFTA negotiation with anything that can be spun into a ‘win’ for Canada.

 

What can be said is that both Freeland and Lighthizer are level-headed and understand the significance of the negotiations.  With regards to the newest Oct. 1st deadline, as Freeland has put it’ “we’re continuing to work very hard and we’re making progress, but we’re not there yet.”

 

As is always the case, uncertainty is bad for CAD, and this is a critical uncertainty.  Expect CAD to remain under pressure for now.

 

 

Author: John Glover



 

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