Donald Trump has announced the new US-Mexico deal
THE GLOBAL stock market shot to a six-month high at the start of the week, after Donald Trump announced a long-awaited US-Mexico trade deal to replace the North American Free Trade Agreement (NAFTA) agreement.
The new deal has eased worries about a trade war, as it could signal a change in the administration’s provocative stance on trade.
The US treasury secretary, Steven Mnuchin, said he was optimistic Canada will join Mexico in signing up to the proposed restructuring of the NAFTA trilateral trade pact.
He said: “I think our objective is to try and get Canada on board quickly.”
Following Trump’s US-Mexico deal announcement the S&P 500 Index and the NASDAQ Composite rose to new records on Monday.
These are two stock market indices, the former based on the top 500 companies listed on the NYSE or NASDAQ, the latter based only on the NASDAQ stock market.
The S&P 500 gained 0.8 percent to close at 2,896.74, with materials and financials as the best performing sectors and the NASDAQ Composite rose 0.9 percent reaching over 8,000 points for the first time.
Stock markets in Europe and Asia followed suit on Tuesday, including the FTSE 100 which closed up about 40 points (or 0.5 percent), and the S&P 500 managed to close at record highs on Tuesday for the third consecutive session.
Donald Trump announced the new US-Mexico deal on Monday
Chief market strategist at FXTM Hussein Sayed said: “Global trade tensions have undoubtedly been the most significant source of risk in 2018.”
He added: “The US-Mexico deal seemed to boost confidence that the trade war is moving closer to an end, and the next question is who’s next to close a deal with Trump?”
The US and Mexico will formally announce their deal on Friday, leaving a 90 day window to complete work on it before the new Mexican president takes office on 1 December.
The Canadian foreign minister Chrystia Freeland was due in Washington on Tuesday to start talks with US trade negotiators as pressure builds to join the new agreement.
The meeting signals the two countries are now coming back to the negotiating table, after Canada was sidelined following a disastrous meeting at the G7 in Quebec in June.
Canadian Prime Minister Justin Trudeau had described the US plans to raise tariffs on steel and aluminium on national security grounds as “insulting” and Trump labelled Mr Trudeau as “very weak and dishonest”.
US commerce secretary Wilbur Ross warned Canada yesterday the Trump administration is “fully prepared to go ahead with or without Canada” in ditching NAFTA and that the Canadian economy “can’t survive well” without the US.
Mr Ross said: “We hope that Canada will come in. I think it’s a good idea if they do. There’s really not much they should object to. But if not, they will then have to be treated like a real outsider.”
Mexican Foreign minister Luis Videgaray speaks during a press conference in Washington DC
Mr Mnuchin echoed the suggestion the US would go ahead with the new US-Mexico deal with or without Canada’s support.
On Monday, Trump even proposed to rename the revised pact “the United States-Mexico Trade Agreement”.
Senior Republicans however have voiced their concerns about the idea of ploughing through without an agreement with Canada, which is the US’s largest export market.
The sentiment is echoed by the US Chamber of Commerce, which said on Monday: “In order to do no harm to the 14 million US jobs that depend on trade with Canada and Mexico, the agreement must remain trilateral.”
Once the US-Canadian negotiations are complete, the US government will likely turn to the EU and China for trade deals next.
Mexican chief negotiator Jesus Seade (L), Economy Secretary Ildefonso Guajardo and Foreign Minister
According to the Wall Street Journal, the US-Mexico deal was mainly the result of talks between Ivanka Trump’s husband Jared Kushner, US trade representative Robert Lighthizer and then Mexico’s finance minister Videgaray Caso.
Mr Caso has reportedly visited the White House around 45 times and developed a friendship with Mr Kushner.
President Trump told reporters at the White House yesterday that his administration’s proposed $25billion addition to the US-Mexico wall “will be paid for very easily by Mexico”, but Mr Caso immediately quashed this suggestion.
He said on Twitter: “We just reached a trade understanding with the US, and the outlook for the relationship between our two countries is very positive.
“We will NEVER pay for a wall, however. That has been absolutely clear from the very beginning.”