Larry Kudlow: Canada Should Study Our Deal With Mexico

Donald Trump announces new trade deal with Mexico

US, Mexico reach NAFTA deal as pressure turns to Canada

He said it would be replaced in part by the newly named United States-Mexico Trade Agreement.

Speaking from the White House Monday morning, President Trump announced a reboot of NAFTA after weeks of negotiations with Mexico. "It's a very good deal for both countries and I look forward to it", Trump said.

"What has happened is not that the Americans or the Mexicans have made a decision to go faster between them, it's just that over the last few months, the Americans have arrived at the negotiating table with requests that specifically targeted Mexico, especially with respect to their proposals in the auto sector", Prof.

"Wages are now very low in Mexico and that is one of the reasons that vehicle makers are attracted to the country, the low cost of labour, but it [the new deal] might also affect whether they want to stay in Mexico or go to Asia and the United States", he added. "This doesn't seem like a well-thought-out plan that leads anywhere sensible".

"The main change - raising the North American regional value content for tariff-free trade in automobiles from 62.5 per cent to 75 per cent - would already be met by nine of 16 vehicle models now produced in Canada". Clearly, the administration hopes this would keep USA manufacturers from moving south of the border.

Leaders of five major U.S. trade unions - the United Auto Workers, AFL-CIO, United Steelworkers, Communications Workers of America and the International Association of Machinists and Aerospace Workers - applauded the U.S. Mexico deal in a joint statement, but warned, "There is more work that needs to be done to deliver the needed, real solutions to NAFTA's deeply ingrained flaws".

"Canada is encouraged by the continued optimism shown by our negotiating partners", said a spokesperson for Canadian Minister of Foreign Affairs Chrystia Freeland. I think it's an elegant name. But incoming Mexican President Andrés Manuel López Obrador has long opposed opening the country's energy sector, and his negotiators had pressed to revise the energy parts of the agreement with the United States.

"I like to call this the United States-Mexico Trade Agreement". While Mexico accepted that change, Canadian officials have said for months that would be unacceptable. "So if they had to compromise on energy, so be it".

"Trudeau and his ruling Liberal party will be concerned about a backlash from rural voters if they cede too much ground to the U.S. That said, there is some wiggle room, and Canada made concessions on this topic in the TPP agreement", he said. (The Administration said Monday that it believes that it has met its legal requirement).

First, though Trump declared NAFTA dead, only Congress can actually undo the legislation that created the three-way trade bloc in 1994. "Perhaps, the other would be much better for Canada".

Mexican President Enrique Pena Nieto wants to sign the agreement before leaving office at the end of November, and Trudeau faces a national election expected by October 2019. NAFTA reduced most trade barriers between the three countries.

Joe Kinahan, chief market strategist at TD Ameritrade in Chicago, said: 'The question most people have is can the markets go higher? A spokesman for the foreign minister said Canada will sign the new accord only if it is good for the country. "We're going to get rid of NAFTA because it has a bad connotation".

In fact, the announcement immediately ran into pushback in Mexico.

Many analysts argue that the White House can only move ahead with a trilateral revamp of NAFTA - not a bilateral deal - because that's what it told Congress it would do over a year ago.

Mexico's peso strengthened against the United States dollar, as did the Canadian dollar, while the USA dollar index weakened slightly.

Jared Kushner, President Trump's senior adviser, chimed in, saying the U.S. -Mexico deal was done "in nearly record time" for a trade deal. Mexico wants Canada a part of it. "The supply chain has to extend from all the way in the north to all the way in the south".

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