The NAFTA renegotiations started on August 16, 2017, shortly after Donald Trump came into power. POTUS has always been very vocal about his dislike of the trade pact, calling it “a disaster for the country". He blames Canada, which set tariff barriers too high for its taste.

Trump threatened to withdraw from NAFTA if Canada and Mexico refused to renegotiate, which they eventually agreed to.

The situation worsened on May 31, 2018, when Trump announced that new tariffs would be imposed on Canada, Mexico, and the EU. In retaliation, Canada imposed tariffs on $12.6 billion of US imports.

U.S. and Mexican officials are currently in talks, but still seem quite far from reaching an agreement, although they made a few advances on rules for car makers unable to meet stricter regional requirements on manufacturing content, according to an August 24 report from Reuters. Both sides have allegedly agreed to raise the amount of a car that has to be manufactured within North America to 75% from a current 62.5%, and boost the percentage of a vehicle that comes from factories that pay higher wages.

Investors are hoping that the U.S. and Mexico can settle their differences quickly before the arrival of the new administration of Mexican President-elect Andres Manuel Lopez Obrador, which is set to take office in early December. Indeed, the new administration would have a say in the final agreement, and this could considerably delay talks.

On top of that, Mexico's chief trade negotiator, Ildefonso Guajardo, told Reuters that the timing of bringing Canada into the talks "depends when we finish" between the U.S. and Mexico.

The uncertainty around NAFTA is having quite an impact on the Mexican markets. Investors surveyed by Bloomberg even believe that this is the biggest factor affecting Mexican investment portfolios, more than its new president…


More than 100 chief investment officers, chief operating officers, investment analysts, and portfolio managers participated in the survey (Source Bloomberg).