All eyes are on NAFTA talks
Investors are closely monitoring trade talk between the US and Mexico on the North American Free Trade Agreement (NAFTA), considering it as the biggest factor affecting Mexican investment portfolios, according to a new Bloomberg survey.
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…