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GM, Ford shares jump in relief as Canada trade deal failure would have disrupted supply chains

Key Points
  • The United States-Mexico-Canada Agreement is expected to require a greater portion of vehicles to be made in North America and establish a minimum fixed wage for car manufacturers.
  • 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. 
Workers install doors on Chevrolet Malibu and Buick LaCross vehicles at the General Motors plant in Fairfax, Kansas.
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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.

General Motors shares rallied 1.5 percent Monday, while Ford rose 0.7 percent. Parts manufacturer Lear Corporation rose 2.6 percent.

The pending United States-Mexico-Canada Agreement is expected to affect 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 of $16 an hour.

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

For Ford and GM, the agreement announced late Sunday 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.

Trump touted the new deal Monday as "a new dawn" for the U.S. auto industry.

Trump also took time to criticize Democrats and international trading partners including China and the European Union.