UNION, INVESTORS LIKE DEAL ON AUTOS

TORONTO • A potential trade deal between the U.S. and Mexico has been greeted with cautious optimism in the Canadian automotive sector despite renewed threats by U.S. President Donald Trump to impose tariffs on the industry.

Trump said Monday the U.S. and Mexico had reached a bilateral “understanding” on a trade agreement that could replace the existing North American trade agreement.

The preliminary agreements include a wage provision that 40 to 45 per cent of auto content would be made by workers earning at least US$16 per hour, and increase in the auto content required from the NAFTA region to 75 per cent, up from the current 62.5 per cent.

If auto content and wage agreements go forward with Canada on board as well, they could stem the flow of auto sector jobs to lower wage jurisdictions, Unifor president Jerry Dias said.

“I believe this should stop the bleeding in Canada.”

Investors have also welcomed the news, boosting automotive stocks on both sides of the border. Canadian auto parts manufacturer Martinrea International Inc. closedup6.18percent, Linamar Corp. closed up 6.57 per cent and Magna International Inc. closed up 4.24 per cent on the Toronto Stock Exchange.

Bill Anderson, director of the University of Windsor’s Cross Border Institute, says he’s concerned about a condensed negotiation window now that key issues between the U.S. and Mexico look to be settled, but that the wage provision would help Canada’s sector.

“Essentially it’s a way of excluding Mexican content, so even though Canada and Mexico have presented a united front, you now have a situation where you could make the argument this will benefit Canada,” said Anderson. “On that particular issue, what benefits the United States also benefits Canada.”

Anderson said it showed the U.S. had also made concessions during negotiations.

“It’s much better for Canada than earlier in the negotiations when they were saying that there had to be a certain amount of American content.”

Canadian Vehicle Manufacturers’ Association president Mark Nantais said it was time for the Canadian government, which has been excluded from the talks between the U.S. and Mexico in recent weeks, to get back to the table.

“Canada’s got a very small window here in which to step up, and we certainly encourage them to do that.”

Nantais said he’s encouraged to see progress on NAFTA negotiations, but that it will be critical to understand the terms that have actually been agreed to sofar.

BMO chief economist Douglas Porter noted investors have welcomed the news and that likely helped push the Canadian dollar up half a per cent on the headlines.