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A Glimmer of Hope on Trade — No Auto Tariffs and a NAFTA Replacement Wins Support

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A Glimmer of Hope on Trade — No Auto Tariffs and a NAFTA Replacement Wins Support

Author: Greg Valliere

May 16, 2019

AMID ALL THE GLOOM OVER TRADE WARS, Congressional negotiators reported real progress yesterday in talks to ratify a replacement for NAFTA, called the U.S-Mexico-Canada Agreement (USMCA). There’s even hope that U.S. steel and aluminum tariffs against the two countries could be lifted later this year.

YOU COULD SENSE A MOMENTUM SHIFT YESTERDAY: The Trump Administration is showing signs of backing away from trade wars on multiple fronts — and there are signs that the grumbling from Republicans in Congress is having an impact. Moreover, signs of a softening U.S. economy could be a catalyst in getting a China trade deal this summer.

WE’RE NOT READY TO BUY STEPHEN MNUCHIN’S HAPPY TALK, since he clearly was too optimistic on a China deal, but his take on the Mexico-Canada talks was surprisingly upbeat yesterday. “I think we are close to an understanding with Mexico and Canada,” Mnuchin said, on labor and environmental safeguards that Nancy Pelosi and most Democrats have demanded in the new USMCA. A deal with Ottawa needs to be ratified this summer, ahead of Canada’s fall elections; yesterday Pelosi indicated that’s do-able.

MNUCHIN AND OTHER TRUMP AIDES undoubtedly have been swayed by withering criticism from Republicans, including Senate Finance Chairman Chuck Grassley, who insists that a USMCA deal must be coupled with the lifting of steel and aluminum tariffs — which suddenly looks possible. And in a sign of thawing, Vice President Pence said he’s been in contact with Canadian Prime Minister Justin Trudeau recently, discussing a possible deal. Trudeau and Donald Trump were barely on speaking terms for the last year.

STILL ANOTHER SIGN OF SOFTENING BY TRADE HARD-LINERS is the White House decision to delay auto tariffs for another six months — after intense criticism from Congress that tariffs would hurt the U.S. industry. “This shows that Trump is listening to criticism in Michigan and Ohio, he knows how crucial those states are for his re-election,” a GOP staffer told us yesterday.

AS FOR A CHINA DEAL, it appears that Mnuchin and high-ranking U.S. officials will travel to Beijing later this month, an encouraging sign. The new catalyst is data from both countries that show economic growth slipping. No one expected second quarter U.S. growth to top the 3.2% first quarter pace, but data yesterday raised the prospect that GDP may expand by no more than 2% this quarter, as uncertainty grows over trade.

AMID SIGNS OF HOPE ON TRADE comes another positive development — a well-placed leak in this morning’s Washington Post that makes it clear that Trump wants to dial back the rhetoric on Iran. Uber-hawk John Bolton apparently has been reined in by the president — Trump clearly is an isolationist who has little stomach for a major new U.S. troop commitment in the Mideast.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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