Tags: mexico | nafta | brexit | trump

FT: Mexico Prepared to Sign Bilateral Trade Deal With US

FT: Mexico Prepared to Sign Bilateral Trade Deal With US
(Bravissimos/Dreamstime)

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Tuesday, 11 September 2018 08:17 AM Current | Bio | Archive

Not-NAFTA Deal

The Financial Times reports that the outgoing Mexico Mexican Finance Minister has told them in an interview that Mexico is open to moving ahead with a bilateral trade pact with the U.S. if Canada cannot reach a deal with the U.S. on the Not-NAFTA trade agreement.

Mr. González Anaya also said that alongside the deal reached with the U.S. in August, that Mexico by signing a side agreement that “locked in” the current low 2.5 percent rate on cars it would insulate its auto industry against any U.S. tariff increase.

For investors it’s important to keep in mind that the issue here is not what Mexico is willing to do, but what is it’s going to get through the U.S. Congress. Senior members of Congress, and many large business lobby groups, have warned that if Canada is not included in the deal, it would fail to garner much support on Capitol Hill, leaving it in limbo.

Talks between Canada and the U.S. continue today.

The NFIB Small Business Optimism Index

Today we got the NFIB Small Business Optimism Index that soared to a new record at 108.8 in August and that shows:

  • Job creation plans and unfilled job openings both set new records.
  • The percentage of small business owners saying it is a good time to expand tied the May 2018 all-time high.
  • Inventory investment plans were the strongest since 2005 and capital spending plans the highest since 2007.

Brexit Treaty

In the interminably tedious process of extricating the European Union (EU) from the UK single market something stirs.

The European Research Group (ERG) chairman Jacob Rees-Mogg who thinks separation is a good thing, failed in his Commons’ speech yesterday to come up with an alternative economic plan for separating.

This matters slightly as the opposition to Prime Minister May in the Conservative Party could be judged to have had its credibility undermined.

There are reports that the EU Heads of government have instructed the EU’s chief Brexit negotiator Michel Barnier to ‘do’ a deal with the UK.

Mr. Barnier said yesterday in a shock U-turn: “I think that if we are realistic we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within 6 or 8 weeks. Taking into account the time necessary for the ratification process, the House of Commons on one side, the European Parliament and the Council on the other side… We must reach an agreement before the beginning of November. I think it is possible.”

As a result, the British pound jumped immediately from $1.2930 to $1.3040 on the news.

Now, for investors all this ‘could’ become really important if indeed a ‘divorce deal’ could be done between the EU and the UK.

Yes, the UK is very important, and it could be helpful to keep in mind that the United Kingdom (UK) is the world’s fifth (5th) economy when measured by GDP and that the City of London ranks first (1st), before New York, in the Global Financial Centers Index (GFCI) as of March 26 of this year.

The British pound or pound sterling also ranks fifth (5th) on the list of the Currency Composition of Foreign Exchange Reserves or ‘COFER’ as published by the IMF.

Kim Jong Un and Donald Trump

The White House said yesterday that North Korea's Kim Jong Un has written to President Trump asking for a follow-up to their historic summit and that President Trump is open to another meeting with the North Korean leader.

To financial markets, this doesn’t really matter. Financial markets have been concerned about the tail-risks of conflict ahead of the first meeting. That risk seems to have died away and financial markets have lost interest in the matter therefore.

Maybe, it’s a bit of a stretch, but markets could perhaps find a precedent for trade talks in all this.

Nevertheless, the newest intelligence shows Kim's regime has escalated efforts to conceal its nuclear activity, according to three senior U.S. officials. During the three months since the historic Singapore summit and Trump's proclamation that North Korea intends to denuclearize, North Korea has built structures to obscure the entrance to at least one warhead storage facility, according to the officials.

U.S. intelligence assesses North Korea could produce five to eight new nuclear weapons in 2018, according to three current and former senior U.S. officials. That pace is virtually identical to their assessment of the regime's production of about six per year prior to the Trump-Kim summit.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The Financial Times reports that the outgoing Mexico Mexican Finance Minister has told them in an interview that Mexico is open to moving ahead with a bilateral trade pact with the U.S. if Canada cannot reach a deal with the U.S. on the Not-NAFTA trade agreement.
mexico, nafta, brexit, trump
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2018-17-11
Tuesday, 11 September 2018 08:17 AM
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