Analyst Analysis: In Trump Case, Canada-US Agreements Save NAFTA as Trilateral Pact

(Reuters) – The United States and Canada reached an agreement last Sunday to save NAFTA as a trilateral pact with Mexico, saving a $ 1.2 trillion free trade zone in three countries. .

COMMENTS:

MICHAEL DYKES, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE INTERNATIONAL DAIRY FOOD ASSOCIATION, A WASHINGTON GROUP THAT REPRESENTS DAIRY PROCESSORS:

"Having this trilateral agreement is very important. We are pleased to see that negotiators have maintained access with our number one customer, Mexico. For Canada, our priorities included increased market access and, as I understand it, we got it.

"We are pleased with the negotiators and are satisfied with the priority they place on the dairy industry."

EDWARD R. HAMBERGER, CHIEF OF THE AMERICAN RAILWAY ASSOCIATION:

"The free movement of goods in North America without expensive tariffs is a net benefit for American workers, basic industries and the economy."

ERIC MEYER, CHAIRMAN OF HIGHGROUND DAIRY, CHICAGO:

"Nothing but good news for the American dairy industry. Class 7 milk pricing in Canada has caused problems for US manufacturers in two different ways. First, it put an end to the flow of ultra-filtered milk, a concentrated ingredient in skim solids used to boost the protein content of cheese and yoghurt made in Canada.

"Second, the pricing system has allowed Canada to compete to export its excess of skim milk powder, thereby removing market share. The elimination of the Class 7 pricing system in Canada could open these markets to US processors. Finally, any further opening of the Canadian market to general imports is useful to the US dairy industry. Although the exact details of the Canada-US agreement have not yet been released, the agreement does not appear to be detrimental to the US dairy industry and should result in an increase in the demand for export of American dairy products.

DON ROOSE, PRESIDENT OF AMERICAN PRODUCTS, A BROKERAGE AND CONSULTING COMPANY IN AG

"This paves the way for many agricultural products. I do not know if (the USMCA) was a surprise; it was definitely positive for all agricultural markets, for the psychology of markets. Going ahead with the negotiations between the EU and Japan – these are probably as dominant (for the market) as NAFTA. "

SHAUN OSBORNE, FX STRATEGIST, SCOTIABANK, TORONTO

"Looking at price action last week, the Canadian dollar outperformed, so there may have been some market sentiment that we could get something or we needed something at the end of the month. of September. but we have already had to face many deadlines and nothing important has happened. I do not know if anyone was too convinced that we were going to have something forced this weekend, but I think most people who see a trade deal would be tied at one point.

"The good news is that the risk of bad news has been removed. I do not think there is anything that really changes the medium-term outlook for the Canadian dollar or the Canadian economy.

DAVID KELLY, CHIEF GLOBAL STRATEGIST, JPMORGAN FUNDS, NEW YORK:

"The most important aspect of this new contract is that they have changed their name. If you read it, it's really about NAFTA changes, but at least some of them in a positive economic direction. It's really very small changes to the underlying framework of North American trade, but that's a good thing. There is only one drawback to a trade war. To the extent that we have avoided a trade war in this hemisphere, at least it is positive.

"Having done a lot of work on Nafta during the elections, but having reached an agreement that only changes small parts of it, says a lot about the potential end of trade negotiations with China. . There is a limit to what China will end up compromising, a limit to what we will need to make compromises in the end. After all, the US trade deficit is mainly due to a high US dollar and a large deficit. "

OLIVER PURSCHE, CEO OF BRUDERMAN BROTHERS IN NEW YORK:

"It's obviously a positive step, it's an extra box to check. Overall, markets and investors are very focused on economic policy and the upcoming earnings season and ignore everything that comes out of Washington. But since last week it was more of an agreement between Mexico and the United States, as opposed to a trilateral agreement, it is a positive development. This shows investors that despite an unconventional approach, the president's tactics seem to work. "

MIKE LORIZIO, MAIN INCOME RETAILER AT MANULIFE ASSET MANAGEMENT IN NEW YORK:

"There is a fairly important risk tone after the new NAFTA agreement.

"However, a possible agreement has been incorporated or, at least, a disaster-free scenario has been integrated. The market was more focused on the risk of a trade war with China than any other field and the market was positioned accordingly. And even with China, the market has ignored the impact that any trade negotiations will have on the fundamentals of the US economy.

"It's a positive result, and you've seen the risky assets react, and you've seen the Treasuries react a bit, but the American fundamentals are so strong right now that the effects of these negotiations have already been incorporated.

RANDY FREDERICK, VICE-PRESIDENT OF TRADE AND DERIVATIVES OF CHARLES SCHWAB IN AUSTIN, TEXAS:

"Everything about trade has always stimulated the markets, so it's not surprising to see a rebound. In general, these things have a relatively short life span, but economic conditions in the market are very strong and only concerns about trade issues have prevented the market from progressing.

ALEC YOUNG, CHIEF EXECUTIVE OFFICER OF GLOBAL MARKETS RESEARCH, FTSE RUSSELL IN NEW YORK:

"The stock rallies after a last-minute deal on Sunday that allows Canada to join the revised US-Mexico trade deal last August. Despite all the difficulties of trade, the bark is much worse than the bite of US stocks.

"While trade prospects with China remain uncertain, overall uncertainty over trade has been declining for months, helping stocks reach record levels. And even as far as China is concerned, many investors are banking on a market-friendly compromise after the mid-November elections in the United States, when the Chinese will be encouraged to negotiate to avoid the 25% rate on 200 billion dollars. January 1, 2019. This rate is currently only 10%. International inventories have even more to gain from commercial breakthroughs than their US counterparts because they have been overly constrained by trade concerns because of the increased sensitivity of their economies to trade. "

MARKET REACTION:

STOCKS: Equities were ahead, with the S & P 500 .SPX up 0.7% early in the session.

FOREX: The Canadian dollar CAD = D4 reached its highest level in four months against its US counterpart. The United States index was stable.