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Analysts at Nomura point out that the US, Mexico and Canada formally announced the successful renegotiation of NAFTA this week.

Key Quotes

“The updated agreement, renamed as the US-Mexico-Canada Agreement (USMCA), retains much of the old NAFTA framework while incorporating some features of the Trans-Pacific Partnership (TPP) and other changes, most notably higher content requirements for auto rules of origin. Next steps will involve a reporting and markup process for the US Congress before ratification sometime in H1 2019.”

“The successful conclusion of trilateral talks between the US, Mexico and Canada may provide a template for other trade deals between the US and major trading partners, most notably Japan and the EU.”

“At the end of the day, the final deal largely upheld the current NAFTA framework despite almost constant uncertainty generated by President Trump’s comments during negotiations. However, we do not view the deal as likely to soften any tensions between the US and China, especially given more hawkish rhetoric emerging from the Trump administration including an aggressive policy speech from Vice President Pence this week. At the moment, it does not appear that the US and China are making any substantive preparations for a possible Trump-Xi meeting at the endNovember G20 meetings.”