Canada and Mexico don't need to worry
The two reasons NAFTA isn't going to be changed are:
- Congress
- Corporate America
When was the last time those two factions opposed something and it happened against their will?
I'm guessing never.
In yesterday's Bank of Canada decision, the statement spelled out NAFTA negotiations as a considerable uncertainty. They don't need to worry.
That doesn't mean the trade is to buy CAD and MXN -- not yet. Trump is going to do some major grandstanding and might even serve the notice that the US is leaving NAFTA. Once he sees what happens to stocks
At the same time, there is no way that Canada and Mexico are going to give in.
"We're asking two countries to give up some privileges that they have enjoyed for 22 years. And we're not in a position to offer anything in return," U.S. Commerce Secretary Wilbur Ross said today on CNBC. "So that's a tough sell."
Ya think?
Negotiations are going to collapse and that's going to send MXN and CAD lower but I suspect a bottom won't be far away, because Trump is going to lose the NAFTA battle one way or another.
Even if he pulls out of the agreement and goes nuclear, US laws aren't clear that he can unilaterally quit NAFTA without Congressional approval. It's likely to end up in courts.
But Trump isn't crazy, he doesn't want a battle here, he wants a win and he will get some cosmetic changes to NAFTA, declare victory and all the worries will fade.
