Canada could be the biggest losers in new NAFTA deal

GBP/CAD -The North American Free Trade Agreement (NAFTA) is currently being renegotiated due to President Trump’s vocal unhappiness with the current deal.

The trade deal between the US, Mexico and Canada has been problematic and at present it seems as though Canada is being excluded form talks. This does not bode well for the Canadian Dollar. Mexico and the US have agreed on a deal. Canada are currently in limbo, will they agree to the deal the Mexican’s have negotiated without any input or will they seek their own individual trade arrangements with the US and Mexico seperately?

The Canadian economy could be in trouble; three quarters of Canadian exports (the equivalent of a fifth of Canada’s GDP) are exported to the US, if harsh tariffs were placed on some of these exports this has the potential to hit the Canadian economy.

Canada could be the biggest loser in the NAFTA renegotiation, it could cause a fall of up to 2.2% of its GDP.

This could also influence monetary policy going forward, with interest rates remaining on hold as the Bank of Canada (BOC) taking on a more cautious approach due to the uncertainty. Investment has slowed considerably in the second quarter, but inflation has risen and an interest rate hike in October was on the cards to 1.75%.

Pay close attention to developments as talks intensify if you have a requirement with Canadian Dollars, volatility is expected. To discuss the potential impact of these discussions to maximise on your position feel free to get in touch, I’ll be happy to talk about your requirements and discuss any questions you may have. You can reach me directly using [email protected].

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