Trump scraps Nafta, puts Canada in limbo
US REACHES NEW TRADE ACCORD WITH MEXICO, RENAMES AGREEMENT
President Donald Trump said he would terminate the North American Free Trade Agreement and sign a new trade accord with Mexico, potentially leaving Canada out of the bloc.
Trump announced the agreement with Mexico in a hastily arranged Oval Office event yesterday with Mexican President Enrique Pena Nieto joining by conference call. Pena Nieto said he is “quite hopeful” Canada would soon be incorporated in the revised agreement, while Trump said that remains to be seen.
Trump said he would speak with Canadian Prime Minister Justin Trudeau “in a little while” and hoped to begin negotiations with him “almost immediately.”
As he announced the move, Trump said he would drop the name Nafta from the accord because of its unpopularity.
“We’re going to call it the United States/Mexico Trade Agreement,” he said. Nafta “has a bad connotation because the United States was hurt very badly by Nafta for many years”. The president hailed the Mexico agreement as “a big day for trade”. The peso rose ahead of Trump’s remarks. US stocks also advanced.
Freeland due in US today
Canadian Foreign Minister Chrystia Freeland will travel to Washington today to continue trade negotiations, her spokesman said.
“Given the encouraging announcement today of further bilateral progress between the US and Mexico, Minister Freeland will travel to Washington, DC, tomorrow to continue negotiations. We will only sign a new Nafta that is good for Canada and good for the middle class. Canada’s signature is required,” spokesman Adam Austen said.
US stocks added to all-time highs, and Mexico’s peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America’s southern neighbour. Treasuries fell.
The S&P 500 Index rose as President Donald Trump unveiled details of the agreement that he says will replace the North American Free Trade Agreement (Nafta), a pact that also includes Canada.
An agreement could ease concerns about an escalation in global trade tensions.
Shares of carmakers and parts producers in the equity benchmark surged more than 3 per cent. The peso rallied, and Canada’s dollar strengthened.
The breakthrough on trade with Mexico captured investor attention amid yet another failure for US and China trade talks. American stocks added to records amid strong earnings and domestic expansion, while Federal Reserve Chairman Jerome Powell’s indication the US will continue to follow a path of gradual tightening was interpreted as having a dovish tone.
The news enabled investors to look past a host of other macro events, including President Donald Trump’s ongoing legal woes, fresh Russian sanctions, a war of words over Syria and faltering efforts to denuclearise North Korea.
While Asian shares rallied on the back of the yuan’s stabilisation, the PBOC’s moves to steady the currency threaten to be an unwelcome step backward in the longer term.
An index of major world stock markets rose to its highest level in more than five months yesterday following signs of progress on a US-Mexico trade deal and reassuring comments from the US Federal Reserve chief.
MSCI’s gauge of stocks in 47 countries gained 0.91 per cent, helped by gains in developed markets. The index was at its highest since March 15.
Saudi Arabia’s Tadawul index closed above the keenly watched 8,000 mark yesterday amid mixed sentiment on sector indices. Support from transportation and consumer durables was offset by weakness in energy shares.
The Tadawul index closed 0.27 per cent higher to 8,000.34, after hitting a high of 8,045.16, the level last seen on August 13.
Saudi Basic Industries Corp. closed 0.16 per cent higher at 125.40 Saudi riyals, while Alinma Bank closed 0.27 per cent lower at 22 riyals. Saudi Kayan Petrochemical Co closed 0.22 per cent lower at 18.24 riyals.
Middle East Healthcare Co. ended 2.55 per cent higher at 42.15 riyals.
The Dubai Financial Market (DFM) also traded mixed. The DFM General Index closed 0.14 per cent higher at 2,829.72. Emaar Properties was the actively traded stock, and closed 0.20 per cent higher at Dh5.04, after losing on Sunday.
“Emaar saw red in spite of a strong performance in the last quarter as investors remain wary of the implications of the lira’s decline on the company’s investments in Turkey,” said Essam Kassabieh, senior analyst with Menacorp.
DP World closed more than 2 per cent higher at $21 (Dh77). Emirates NBD extended its gaining streak for a third session in a row.
Emirates NBD closed 2.37 per cent higher at Dh9.50. In other stocks, Dubai Islamic Bank closed 0.30 per cent higher at Dh5.02.
Emaar Development closed at Dh5.15, down 1.34 per cent. Total traded value stood at Dh130 million, not even half compared to the past few weeks.
The Abu Dhabi Securities Exchange general index closed 0.6 per cent higher at 4,938.92 amid low volumes.
“In spite of the perceived rebound of both exchanges in the last couple of trading sessions, the persisting low trading volumes cast a shadow on the future outlook and any clear indication on the direction of the markets is yet to be seen,” Kassabieh said.
Elsewhere in the Gulf, the Muscat MSM 30 index closed 0.34 per cent higher tat4,381.78. The Qatar exchange index closed 3.78 per cent higher at 9,802.63.