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What Does Trump’s Mexican Victory mean for China and Canada?

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What Does Trump’s Mexican Victory mean for China and Canada?

Author: Greg Valliere

June 10, 2019

A WIN IS A WIN: As we suspected, Donald Trump was eager for a truce in the U.S.-Mexico spat. Even though there weren’t a lot of new provisions, especially on immigrant asylum, the deal allows Trump to proclaim a victory, and despite misgivings in the Mexican legislature, this has boosted President Lopez Obrador’s popularity.

MOST SIGNIFICANTLY, THE DEAL allows Trump to keep Mexico on a short leash that he can yank if immigration doesn’t subside; it also avoided a meltdown between him and Congressional Republicans; and it may have stopped the stock market sell-off. And as a bonus, there’s a strong likelihood of a Fed rate cut this summer, in part to alleviate the impact of a tariff crisis that Trump himself created.

SO — WHAT DOES THIS MEAN FOR CHINA AND CANADA?

CHINA: The G-20 summit late this month will be crucial; we think Presidents Trump and Xi need a deal and will have a constructive meeting that will result in efforts to get trade negotiations back on track. Unfortunately, the acrimony between both countries has escalated, and there are so many unresolved issues that it could take months before a final deal is hammered out. But the markets want to see some sings of progress, and we think there will be.

CANADA: The USMCA trade deal, replacing NAFTA, still faces an uphill fight in Congress. Nancy Pelosi and most Democrats want to re-open the pact, adding labor and environmental provisions, but relations between Pelosi and Trump are so radioactive that any type of deal would have to be negotiated by surrogates. Encouragingly, Vice President Pence apparently has developed a constructive relationship with Canadian Prime Minister Justin Trudeau.

AMID ALL THE MOVING PARTS ON TRADE, HERE ARE OUR ODDS:

  • Chances that the Mexican deal will stick, with a breakthrough on asylum: 65%.
  • Chances that U.S. trade talks with China get back on track: 70%.
  • Chances that a final U.S.-China trade deal can win approval by year-end: 55%.
  • Chances that the USMCA will win approval by year-end: 45%.
  • Chances of new tariffs on Europe, leading to major EC reprisals: 60%.

BASED ON THOSE ODDS, the trade outlook obviously will remain unclear; Trump is a “tariff man” who has no reservations about using this blunt weapon, so there’s bruised feelings and apprehension among virtually all U.S. trading partners. Thus the global economic anxiety will persist, giving Trump what he really wants: even lower interest rates, with the Fed moving in late July and probably again in December.


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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©2022 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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