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— This is the script of CNBC's news report for China's CCTV on August 28, 2018, Tuesday.
After several rounds of negotiations, US and Mexico reached this agreement, the financial market experienced turbulence along with the negotiation progress. And US actually made some compromise.
The biggest trade disagreements between those 2 countries are US demand for inserting a fixed expiration date for NAFTA, and that is sunset clause. That is to say, US ask the members to reevaluate NAFTA after five years at a time, Mexico and Canada against this proposal, saying that would create uncertainty to the future implementation of the deal and paralyze business investment and job growth.
According to the latest deal details, US wanted to make sunset clause a process that reevaluated one time per 6 years, in order to prevent the trade agreement from expiring. While the validity of NAFTA itself is 16 years, the agreement will be extended for another 16 years after a six-year review is completed. Markets have a positive sentiment to the reach of this deal.
After news released, US stock jumped: DJ gained more than 1%, S&P500 was up more than 0.7% and NASDAQ increased above 8000, hitting a new history high.
At the same time, Mexican peso rose more than 1.4% against the dollar on the day, before easing back slightly and the dollar index fell back, causing the Canadian dollar up more than 0.5 %on the day.
The market believes Canadian dollar gained is because the outlook for NAFATA negotiation got improved, with a slight increase in certainty. And the market will focus on the negotiation between US and Canada. Mexico president Peña stressed that the trade deal including Canada is extremely important. US president Trump and trade officials, however, said if theUS and Canada can't reach an agreement, they will kick off Canada from this deal.
Director of the United States National Economic Council
I must say from Time to Time, The President has said if we cant reach a good strong fair deal with Canada, we might have to resort, the US might have to resort to auto tariffs, so we'll see what happens. Hopefully cananda will cooperate, and move the ball in our direction.
Now, Minister of Foreign Affairs of Canada Freeland has shortened her EU trip, and Freeland will departure on Tuesday, 28, to Washington. The spokesman emphasized Freeland only sign the trade deal that is good for Canada. So we can't ignore the uncertainty in the following negotiation. Additionally, we know that NAFTA has a 20 years history. Trump said he doesn't mind changing new agreement's name. Whatever NAFTA will have a new name, what we know is new agreement is still facing uncertainty.