US-Mexico-Canada Agreement (USMCA) Reached Ahead Of Midnight Deadline

Update 4: In a joint statement by U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, the new trilateral trade deal will be known as U.S. Mexico Canada Agreement, or USMCA. The new trade agreement with Mexico means "freer markets, fairer trade and robust economic growth."

"Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA).

USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.

It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.

We look forward to further deepening our close economic ties when this new agreement enters into force.

We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months."

Key aspects of the new deal (via Bloomberg):

  • USMCA will include new provisions on unfair trade practices, according to U.S. officials.

  • Agreement includes new market access for farmers, including dairy

  • U.S. reaches deal with Canada, Mexico on car tariffs

  • Allows for pact to be signed by leaders at end of November

  • No agreement on Canada steel, aluminum at this point

  • USMCA includes rules on financial services, intellectual property

  • It has stronger labor provisions to level playing fields between partner countries; will incentivize more automobile production in the U.S.

The Mexican Economy Minister has just delivered the new NAFTA text to the Senate.

"It's a good day for Canada," said Prime Minister Justin Trudeau as the meeting wrapped up just over an hour after it started.
And with that, he said he would talk to reporters Monday.

The peso and the loonie are extending gains on the final headlines.

And US equity futures are holding notable gains...

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Update 3: The final wildcard after today's events, whether Trump had approved the big picture terms of the agreement, was resolved moments ago when Reuters blasted:

  • TRUMP HAS APPROVED FRAMEWORK DEAL WITH CANADA TO UPDATE NAFTA - SOURCE FAMILIAR WITH DECISION - Rtrs

According to the preliminary terms, Canada will offer access of roughly 3.5% of domestic dairy market to the US and will agree to a vehicle export quota of 2.6 million vehicles that could be exported to the US tariff free or near tariff free. Meanwhile, as reported previously, the Chapter 19 dispute resolution process will remain unchanged.

However, US tariffs on steel and aluminum will remain for now.

“We will enter October with a trilateral North American trade deal,” said Dan Ujczo, a trade lawyer with Dickinson Wright. “This was the least difficult part. The heavy lift is going to be getting a trade deal through the next Congress in 2019 as well as ratification by Mexico’s new Congress and in Canada during a federal election year.”

In response to the news, S&P futures have continue to rise and will likely hit a new all time highs shortly.

According to Daniel Dale of the Toronto Star, the name NAFTA is likely to change. Trump, often concerned about branding above all else, says he wants to call it "USMC," for US-Mexico-Canada - "like the United States Marine Corps, which I love." We will see how the United States Marine Corps feels about this.

Meanwhile, as Bloomberg adds, no other politician must be happier about tonight's agreement than Mexican President Enrique Pena Nieto. After all, the whole point of the Sept. 30th deadline is to get a signing ceremony by Nov. 30, his last day in office.

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Update 2: The US and Canada reached a deal to revise the terms of NAFTA and keep it a trilateral pact with Mexico, ahead of a midnight deadline with agreements to boost U.S. access to Canada’s dairy market and protect Canada from possible U.S. autos tariffs, Reuters reported citing 2 sources. Separately, a Mexican source close to the Nafta talks said that "we have a trilateral deal."

Following the news, U.S. stock futures hit session highs:

  • Dow Jones index futures +0.5%
  • Nasdaq index futures +0.6%
  • S&P 500 futures +0.5%

As Bloomberg notes, this would make for another Trump deal with a traditional U.S. ally. Just the past couple weeks:

  • Trade deal with South Korea
  • Trade deal with Mexico
  • Trade deal with Canada
  • Trade talks agreed to go forward with Japan

Big on the to-do list are talks with the EU. If the Trump administration clears all these off the to-do list, that just leaves China. The deal was leaked as Canadian Prime Minister Justin Trudeau convened a 10 p.m. Cabinet meeting to discuss the NAFTA deal.

While we wait for the final trade deal text, Bloomberg reports that as part of the agreement, Canada will grant more dairy access to US farmers in return for keeping the Chapter 19 dispute-settlement mechanism; According to Reuters, the deal also involves Canada agreeing to a effectively capping auto exports to the US.

As we reported earlier, and as Reuters confirmes, Chapter 19 dispute resolution mechanism is to be maintained in its current form in the new Nafta.

Trump’s administration had said that Canada must sign on to the text of the updated NAFTA by a midnight Sunday deadline or face exclusion from the pact. Washington has already reached a bilateral deal with Mexico, the third NAFTA member.

As Reuters also adds, Canada had agreed to a cap on its automotive exports to the United States in the event that the Trump administration imposes global autos tariffs on national security grounds. The quota would allow for some growth in tariff-free automotive exports from Canada above current production levels, the source said.

The Mexican Economy Ministry plans to publish the text of its trade deal with the U.S. to its website around the time that they deliver it to the Senate, 10:30pm Mexico time.

But not everyone was happy: The influential Dairy Farmers of Canada lobby group - which strongly opposes the idea - said in a statement that it insisted “any final NAFTA deal should have no further negative impact on the dairy sector.”

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Update: a Nafta deal has been reached, and an announcement on Sunday night is imminent. Canada has agreed to join the trade deal that the U.S. and Mexico announced last month, according to the WaPo. The move preserves the three-country format of the original North American Free Trade Agreement favored by business groups and congressional Republicans,The treaty is expected to be signed by leaders of all three countries in 60 days, with Congress likely to act on it in 2019. A formal announcement is expected before midnight.

As Bloomberg's Jennifer Jacobs reports, Canada and U.S. negotiators are just doing finishing touches. Furthermore, Jacobs adds that "Trump has been fully briefed and is ON BOARD with the deal."

While details are scarce, they confirm what we reported yesterday, namely that Canada will grant more dairy access to US farmers, potentially in return for keeping the Chapter 19 dispute-settlement mechanism; according to Reuters, the deal also involves Canada agreeing to a effectively capping auto exports to the US:

  • CANADIAN SOURCE SAYS FRAMEWORK DEAL INVOLVES OFFERING MORE DAIRY ACCESS TO U.S. FARMERS
  • CANADIAN SOURCE SAYS DEAL INVOLVES CANADA AGREEING TO SIDE LETTER ARRANGEMENT EFFECTIVELY CAPPING AUTO EXPORTS TO U.S.

Bloomberg's reporting echoes the latest update from CTV, whose Richard Madan tweeted that "top US Source says "deal is done" re #NAFTA. Joint statement from @USTradeRep & Canada's Freeland expected soon."

Meanwhile, Bloomberg also reports that while a deal is imminent, the joint statement has yet to be finalized. Since the midnight deadline is in just two hours, this will likely be resolved shortly.

 

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Earlier:

As previewed yesterday, ahead of tonight's midnight deadline for a Nafta deal between the US and Canada, it appears that a deal has been agreed upon according to unconfirmed reports, with the only outstanding items being approval from Trudeau and Trump.

To that end, moments ago Canada's CTV reported that Canada Prime Minister Justin Trudeau has called a cabinet meeting for tonight at 10pm, "as senior Canadian officials appear to be close to a NAFTA deal." Trudeau arrived at his office around 7 p.m., where high-level staff and Foreign Affairs Minister Chrystia Freeland have been working since early Sunday morning to secure a NAFTA deal.

He took no questions from reporters who have gathered there to monitor the latest developments as the intense last-minute push before the U.S.-imposed midnight Sunday deadline inches closer.

The end of day deadline is to work out a trilateral renegotiated text that can be presented to the U.S. Congress and can be signed off by the outgoing Mexican president before his term runs out on November 30, otherwise the U.S. and Mexico intend to go ahead without Canada.

According to a Bloomberg report, the two sides were discussing the last sticking points, including greater market access for U.S. supplies into Canada’s dairy market, in exchange for concessions from the Trump administration which was reportedly ready to agree with Canada’s wish to keep Chapter 19′s dispute-settlement mechanism.

Earlier on Sunday, Canada’s ambassador to Washington, David MacNaughton, said that talks are moving forward but not yet completed. “Lots of progress but we’re not there yet,” MacNaughton told reporters in Ottawa, where the Canadian team is gathered. He said he didn’t know if a deal would be reached Sunday, although an announcement now appears imminent.

Reaching a pact with Canada allows the 24-year-old pact to remain trilateral and for the U.S. to check another box for its legislative process in the lead up to a congressional vote.

As reported yesterday, last minute progress on negotiations was made thanks to Trump senior adviser Jared Kushner for helping smooth the path toward a deal.

When it looked like negotiations had stalled or broken down due to friction between the U.S. and Canadian sides, Kushner kept talks going with aides close to Prime Minister Justin Trudeau, including Gerald Butts and Katie Telford, three people said.

Ahead of the announcement, the Canadian dollar jumped to its strongest level since May, rising 0.5% to C$1.2847, and paring its 2018 decline to 2.4%. The Mexican peso gained about 0.2 percent. S&P futures rose 10 points ahead of the announcement.