Problems with NAFTA2

Posted by: Paul Donovan

16 Dec 2019
  • The NAFTA2 (USMCA) trade deal has run into some problems. The Mexican government is suggesting that the deal before the US Congress contains things that Mexico has not agreed to. Negotiators are due to meet. This has wider implications, as markets await the details of the US-China Phase 1 trade agreement.
  • China's economic data showed reasonable domestic consumption. Industrial production was stronger than expected - China's industrial production is mainly for domestic use. The costs of "the art of the deal" trade negotiations were evident. Uncertainty kept Chinese investment spending weak. About half of the Eurozone's exports to China are investment goods.
  • The US House of Representatives is expected to impeach US President Trump this week. Markets are not interested; investors do not expect the Senate to convict. The Senate majority leader is coordinating the terms of the trial with the White House.
  • Assorted sentiment polls are due out, which will at least give television anchors something to talk about. UK Prime Minister Johnson may announce some changes to the cabinet. This may give guidance to the tone of negotiations with Europe. The next Bank of England governor may be announced. (I have no ambitions in that direction. However, if called upon to serve…).

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