United States-Mexico-Canada Agreement (USMCA)
The updated NAFTA agreement, dubbed the “United States-Mexico-Canada Agreement (USMCA)”, gave the U.S. increased access to Canadian markets for U.S. dairy producers. In turn, Canada obtained a key concession from U.S. negotiators to preserve a dispute resolution process.
Furthermore, the USMCA agreement also includes key provisions with respect to the auto industry that encourages increased U.S. car production, while at the same time, protects Canadian and Mexican companies from the imposition of further U.S. tariffs by the Trump administration.
“The announcement of the trade deal with the U.S. removes the last obstacle to monetary policy normalization by the Bank of Canada,” said Krishen Rangasamy, senior economist at National Bank Financial in Montreal, in a research note. “The central bank, which had been concerned about exports and investment amidst rising trade barriers, can now more forcefully address mounting inflation pressures.”
With the a trade war between the U.S. and Canada averted, “Governor Stephen Poloz is now all but certain to boost his key lending rate by a quarter point to 1.75 per cent at the next meeting on Oct. 24. Beyond that, it also brings into play the idea the economy can handle more than the two rate increases that had been expected next year, according to economists at some of the country’s largest banks,” per a report by the Financial Post.
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