This morning in metals news, the U.S. and Canada have reached a deal on the North American Free Trade Agreement (NAFTA) after several weeks of talks, Secretary of Commerce Wilbur Ross said the steel and aluminum tariffs on Canada and Mexico will remain in place, and copper prices are down on account of perceived drops in Chinese demand.
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Just in Time
In before a Washington-imposed deadline, Canada and the U.S. reached a deal on NAFTA late Sunday, which would keep the deal a trilateral arrangement (the U.S. and Mexico reached a preliminary agreement in August). The new deal is being called the United States-Mexico-Canada Agreement (USMCA).
“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico,” President Donald Trump tweeted. “The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many … deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”
United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland released a joint statement on the deal.
“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA). USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.
“We look forward to further deepening our close economic ties when this new agreement enters into force.
“We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months.”
Among the hangups for the U.S. in talks with Canada were dairy tariffs; however, the deal offers good news for U.S. dairy farmers, as it gives the U.S. greater access to the Canadian market.
Metals Tariffs Staying in Place
Even after the U.S. and Mexico reached their preliminary deal in August, questions remained regarding the U.S.’s Section 232 metals tariffs and whether they would remain in place with respect to Mexico (and Canada).
According to Secretary of Commerce Wilbur Ross, the new NAFTA — or USMCA, as it’s being called — will not result in the removal of the tariffs. Canada and Mexico initially had temporary exemptions to the steel and aluminum tariffs, but the exemptions were eventually allowed to expire June 1.
“There are problems specific to steel and aluminum relating to our national defense, and at this point of time, those stay the same,” Ross told Fox Business Network, as quoted by MarketWatch.
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Copper Slides on China Demand
Copper prices dropped on some not-so-positive news regarding Chinese demand, Reuters reported.
MetalMiner’s Take: A stream of bearish news out of China is having its impact on commodity prices.
For example, copper has shown weakness despite evidence from falling LME inventory that demand outside China remains firm.
Through the first five months of this year, China’s fixed-asset investment — a core driver of Chinese growth that includes spending on new buildings, machinery and infrastructure — grew at its slowest annual pace since at least 1995. Retail sales, an indicator of consumer demand, also increased at their slowest pace since 2003.
Investors are taking multiple data points indicating weakening demand and extrapolating slowing copper demand in the world’s largest consumer. Whether they are right depends in large part on the outcome of the current trade war with the U.S., to which an early resolution seems unlikely.