The US is going to hand Canada a take-it-or-leave it offer
NAFTA negotiations are suddenly looking ominous for Canada.
In a press conference today, Mexican foreign minister VLidegaray has repeated over and over again "we don't really need Canada to do this deal. We're all set."
Previously, Mexico had repeatedly said this was a three-party agreement and that the US and Mexico were just working out bilateral problems with the US. Once those were worked out, the issues affecting all three parties would be discussed together.
That didn't happen. The US and Mexico agreed on a 16-year provision and removing dispute resolution -- things Canada didn't want.
Freeland has cut short at trip from Europe to go to Washington and she's undoubtedly fuming.
Ultimately, Canada may accept the deal but there's clearly a strategy here to isolate the Canada and it's one that caught them by surprise. The comment from Freeland that a deal needs three signatures sounds weak and desperate.
USD/CAD is down 56 pips today to 1.2969 on optimism about a deal but BMO economist Doug Porter is worried.
"We still openly wonder whether this is a net positive for Canada as things stand right now-it is not yet obvious that a deal agreeable to Ottawa can be reached, and the President's tone today was far from encouraging on that front," he writes.
Dispute resolution is a big deal for Canada. Before the original free trade agreement in 1987, Canada walked away from the table on it. Companies don't like US courts because they can be politicized.
In the FX market, USD/CAD briefly touched the lowest since July 15 and continues to hang around that area but this could easily turn into a double bottom.
