The US Congress has to ratify the United States-Mexico-Canada Agreement (USMCA), if it fails to do so, the US could likely withdraw from NAFTA. Analysts at Wells Fargo point out that it would not have meaningful macroeconomic effects for the US economy in the short run, but they warn it could lead to significant adjustment costs for individual industries, especially for the automotive industry.

Key Quotes: 

“The leaders of the United States, Mexico and Canada reached agreement late last year on a trade deal that would reform NAFTA, but the U.S. Congress has not yet ratified the accord. If Congress does not ratify the USMCA, the Trump administration could potentially withdraw the United States from NAFTA. In that event, trade between the United States and its North American neighbors would no longer be duty free, as it has been over the past 25 years.”

“Revocation of duty-free trade likely would not have meaningful macro effects, at least not in the short run, on the U.S. economy. The United States levies single-digit tariff rates on imports of goods from most countries, so inflation likely would not rise significantly if duties would be imposed on Canadian and Mexican goods. Tariffs would raise the prices on American goods entering Canada and Mexico, but final spending in those two countries accounts for only 2% of the value added that is created in the U.S. economy.”

“The inefficiencies that are associated with the pricedistorting effects of tariffs could compound the negative macroeconomic effects over time. Moreover, individual industries, especially the automotive industry, could be significantly affected if trade between the United States and its North American neighbors is no longer duty free.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD regained its traction after dropping toward 1.0350 in the early American session and climbed above 1.0400. Trading conditions remain thin on Black Friday and the pair remains on track to end the week in positive territory.

EUR/USD News

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD managed to stage a recovery toward 1.2100 in the American session on Friday and now looks to register gains for the third straight week. The US Dollar struggles to preserve its strength as markets remain subdued on Black Friday. 

GBPUSD News

Gold steadies near $1,750 as US yields retreat

Gold steadies near $1,750 as US yields retreat

Gold price continues to move sideways at around $1,750 heading into the weekend. The benchmark 10-year US Treasury bond yield retreated from the daily high it touched above 3.75% earlier in the day, allowing XAU/USD to erase a portion of its daily losses.

Gold News

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin price is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

Read more

FX next week and yield curve inversions

FX next week and yield curve inversions

Since the Fed's last raise November 3, Fed Funds rate opens and closes at 3.83. The Fed Funds rate once traded freely on its own with highs and lows as any financial instrument. In 2000, Central banks implemented meetings every 6 weeks.

Read more

Forex MAJORS

Cryptocurrencies

Signatures