“Big Deal Looking Good”: US, Mexico Agree To Nafta Pact

A Mexican official told CNBC on Monday that Nafta trade talks with the U.S. have wrapped up, and President Donald Trump has signed off on a bilateral agreement with Mexico to revamp the North American Free Trade Agreement; an announcement is expected later on Monday, according to Bloomberg.

“A big deal looking good with Mexico!” President Donald Trump tweeted earlier on Monday.

As the Mexican Economy Minister Ildefonso Guajardo entered the Washington office of the U.S. Trade Representative’s office where negotiations are going, he told reporters that there is one bilateral difference left to iron out. He declined to identify the issue.

And while Mexican negotiations may effectively be over, there is no deal reached yet with Canada. As has been the case over a year of intense and sometimes fractious negotiations to update the decades-old Nafta, it’s not the end of the road. But optimism is running high of salvaging the pact that Trump has threatened to scrap, Bloomberg adds.

The Mexican official also told CNBC the U.S. and Mexico have “reached understanding on key issues,” adding that Canada will now “re-engage” in the negotiations. Canada has remained on the sidelines of trade talks recently while the U.S. aimed at first striking a deal with Mexico.

“Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,” Chrystia Freeland, Canada’s foreign minister, said on Friday. “And will be happy to do that, once the bilateral US-Mexico issues have been resolved.”

Significant breakthroughs between Mexico and the U.S. came during the past several days on automobiles and energy.  Officials had hoped to wrap up last week but that was before the distraction caused by the guilty plea entered Tuesday by President Trump’s former lawyer, Michael Cohen, and the guilty verdict handed down against Trump’s former campaign manager Paul Manafort.

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Still, there are risks: as Bloomberg’s Benjamin Dow writes, with a long time to go until Canada’s sign-off – and Trump likely having to get a new deal through Congress – there are a few scenarios that could slow or alter a deal and hurt the MXN.

  • One is if Republicans lose control of the House in November, then are forced to try to pass a new tripartite deal with one half of Congress possibly hellbent on obstructionism. Another, “minibus” spending bills, involves shutting down the government, and involves border-wall funding and more money for immigration enforcement.
  • Another unknown is GOP leaders’ partnership with Trump. The elaborate packaging of bills was undertaken after the president said he wouldn’t sign another omnibus into law. None of the bills that leaders plan to send him in September address his top priority: money for the wall along the U.S.-Mexico border.’

The friction that could come from U.S. and Mexican leadership over non-tariff disagreements makes the BBVA analysts’ call of 18.4 pesos per dollar sound like a best-case. For now, however, the Mexican peso has jumped 1% higher against the dollar at 18.7, but is modestly fading its gains.

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Author: Tyler Durden