More USMCA noise & WTO risks - TD Securities

"Statements around USMCA ratification last week were a good reminder to markets of the hurdles that remain," note TD Securities analysts.

Key quotes

"Bill Pascrell (House, D) poured cold water on expectations for a smooth process, noting that the agreement cannot be passed "as is." His statements carry weight as he is in line to chair the House Ways and Means Trade Subcommittee. Importantly, however, his comments come as no surprise as Democrats have every incentive to fight for a "better" deal, and one way is to strengthen the enforcement language around labour provisions, as also highlighted by Pascrell and many other Democrat officials. Nonetheless, expect noise around headlines and Democrat discontent to escalate at the start of the year when the new Congress is officially sworn in. A vote may not occur until at least March, after the ITC report on economic impacts is released."

"Attention turns to the WTO dispute hearing on November 21, when the WTO will hear whether or not Sec 232 and 301 tariffs were justified on national security and IP theft grounds, respectively. Recall that a WTO decision ruling against the tariffs could prompt formal US threats for WTO withdrawal. However, odds are in favor for the WTO to keep the tariffs in place, meaning that tariff removal would be negotiated on a bilateral basis. Meanwhile, trade tensions ring high since the weekend after failed talks at the APEC summit, lowering odds at the margin for any meaningful breakthrough in US-China relations at the upcoming Trump-Xi summit. One of the issues, in particular, was WTO reform, a topic that we expect to come to the forefront in 2019."