US Auto Sector Rises After US Canada Agreement

Automobile manufacturers Ford and General Motors rallied Monday after the United States and Canada struck a last-minute deal to replace the North American Free Trade Agreement late Sunday night.

General Motors shares rallied 1.8 percent in premarket trading Monday, while Ford rose 2.1 percent. Parts manufacturer Lear Corporation rose 3.5 percent.

usdcad Canadian dollar graph, October 1, 2018

The pending United States-Mexico-Canada Agreement is expected to impact the auto industry most, requiring a greater portion of vehicles to be made in North America and establishing a minimum fixed wage level for car manufacturers.

The USMCA also includes a concession by Canada to effectively cap its automobile exports to the U.S.

For Ford and GM, the new agreement likely comes as a relief after President Donald Trump threatened in May to tax all auto imports in an attempt to safeguard national security.

Tariffs would have been a negative for both manufacturers, according to Moody’s analysis, since 30 percent of GM’s U.S. unit sales depend on imports from Mexico and Canada, while 20 percent of Ford’s domestic unit sales depend on such imports.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza