10 January 2018

Canada Raises Alarm on Trump Leaving Nafta

News

Canadian government officials said there’s an increasing likelihood U.S. President Donald Trump will give six-months’ notice to withdraw from Nafta, dragging down the loonie, yields on government bonds and Mexico’s peso.

The officials, speaking Wednesday on condition they not be identified, declined to say whether they think the odds of Trump following through on repeated threats to quit the pact now exceed 50 percent. A White House official, speaking on background, said there hasn’t been any change in the president’s position on the North American Free Trade Agreement.

The comments have raised worries the Nafta countries -- the U.S., Canada and Mexico, who trade more than $1 trillion annually -- are further apart on coming to an agreement than feared. The Canadian officials said a U.S. withdrawal notice could come at any time, and Prime Minister Justin Trudeau’s government is considering all options related to industries that would be most affected.

Trump withdrawing from Nafta “was always a risk, but that risk is clearly more elevated now,” said Brian DePratto, senior economist at Toronto-Dominion Bank.

Trade relations between the two countries have taken a dramatic turn this week, with Canada escalating its spat with the U.S. by filing a World Trade Organization complaint over American duties against Canada and other countries. U.S. Trade Representative Robert Lighthizer called that a “broad and ill-advised attack.”

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