The most important clause in the new NAFTA deal

The most important clause in the new NAFTA deal

Mexican peso and Canadian dollar surge after new US trade agreement

President Donald Trump speaking with the Mexican president as Trump made an announcement on NAFTA in the Oval Office. Kevin Lamarque/Reuters

The Mexican peso and the Canadian dollar were surging Monday morning after the US and Canada struck an agreement that strengthens the trading relationship of the three North American economic powerhouses.

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Trade negotiators for the US and Canada on Sunday evening put the finishing touches on a deal to reshape the 25-year-old North American Free Trade Agreement, known as NAFTA. It is the largest trade-deal rewrite of President Donald Trumps tenure.

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The agreement came just hours before a deadline set by the Trump administration and will now need congressional approval. It follows more than a year of negotiations between the US, Canada, and Mexico over the trilateral agreement.

Trumps agreement with Canada concludes a lengthy negotiation period and adds to the agreement struck in August by the US and Mexico, ensuring continued strong ties among the three nations.

The US and Canada on Sunday sealed the deal on a new trade agreement that, along with an earlier US-Mexico agreement, opens to door to a rewrite of the North American Free Trade Agreement.

The president greeted the agreement as “wonderful” on Monday morning, calling it “a great deal for all three countries.”

While Peter Navarro, the director of the White House National Trade Council, said the new deal means that “NAFTA is dead,” the USMCA still retains large swaths of the original deal.

Canada and the U.S. Have Reached a Deal on NAFTA: Official

“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico,” Trump said on Twitter, adding that NAFTA would be renamed the United States-Mexico-Canada Agreement.

The timeline of the notification period has provided urgency to spearhead a NAFTA deal through Congress and onto the desk of Mexican President Enrique Peña Nieto before President-Elect Andrés Manuel López Obrador takes office in December. While López Obrador did have representatives present during the US-Mexico talks, US and Mexican officials worried about about possible political upheaval around the changeover.

“It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world,” he said. “The USMCA is a historic transaction!”

The statement went on: “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.”

As the smallest of the three economies, Mexico sees outsize benefits from its trading partnership with the US and Canada.

The peso has rocketed, gaining about 0.7% in trade against the dollar on Monday morning. By just after 10 a.m. BST, or 5 a.m. ET, the currency was trading at 18.54 to the dollar, as the chart below illustrates (this pairing shows the dollars fall against the peso, rather than the pesos gains):

The new NAFTA deal also came on the last day before a Trump-imposed deadline to reach an agreement. Trump is renegotiating NAFTA under what is known as Trade Promotion Authority. While TPA gives Trump the ability to send a deal to Congress for a simple majority vote, it also includes a statutory 60-day notification period.

“Investors have been waiting patiently for some good news regarding trade since the US escalated trade tensions earlier this year,” Jasper Lawler, the head of research at London Capital Group, said in an email. “There is clear elation that a deal has been struck.”

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The Canadian dollar has followed a similar pattern to the peso, gaining against the US dollar in overnight and European morning trading, though gains have been a little smaller:

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The United States and Canada preserved their trilateral trade agreement with Mexico overnight, reaching an eleventh-hour deal which lifted global markets.

Justin Trudeau, the Canadian prime minister, hailed a good day for Canada as officials claimed that their overhauled agreement would create well-paid jobs and boost the economised of all three countries.

The deal to transform the North American Free Trade Agreement (Nafta) — which President Trump had branded the worst trade deal ever made — into the United States-Mexico-Canada Agreement (Usmca) follows months of uncertainty over the trade zone.

Nafta first came into effect in 1994 and underpins $1.2 trillion in annual trade between the three countries but Mr Trump believes that it has damaged the US economy by shifting American industrial jobs in…

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