Trump

The End Of NAFTA Boosts U.S. Markets

Posted Tuesday, August 28, 2018 by
Shain Vernier • 2 min read

Since its inception, the North American Free Trade Agreement (NAFTA) has been a controversial trade deal. One thing is for certain: U.S. markets are enjoying its dying gasps. Both the DJIA and S&P 500 have opened in the green yet again, grinding north toward all-time highs.

U.S. President Donald Trump has been an outspoken critic of NAFTA. Citing the staggering U.S. trade deficits created under the agreement, he pledged to pull out or renegotiate the agreement as far back as the 2016 campaign trail. Monday’s trade deal with Mexico marked the fulfillment of this campaign promise and the beginning of the end of NAFTA as we know it.

The End Of NAFTA?

In many ways, NAFTA has been both a success and abject failure. The core U.S./Mexico trade agreement reached Monday includes several key revisions, largely pertaining to the automobile industry. Here they are:

  • To qualify for zero tariffs, car companies will be required to manufacture 75% of an automobile’s value in North America
  • Local steel, aluminum and auto parts are to be used
  • 40-45% of a single automobile must be made by workers earning at least $16 per hour

The auto industry has been a favorite target of policy for the Trump administration. These new agreements with Mexico are geared to boost North American production, wages and cooperation. A U.S./Canada trade deal is expected to be inked by the weekend, completing the first set of revisions to NAFTA. This is a fluid situation, so stay tuned.

S&P 500 Technicals

The September E-mini S&P 500 futures are enjoying the news on the NAFTA front. Values continue to trend higher, breaking new ground for a second consecutive session.

September E-mini S&P 500 Futures (ES), Daily Chart
September E-mini S&P 500 Futures (ES), Daily Chart

Overview: From a technical standpoint, there really isn’t a whole lot to look at for the daily September E-mini S&Ps. We are trending higher, with the only possible resistance being big round numbers. Today, it appears that the 2900.00 level may bring some two-way action to the market.

Be on the lookout for news out of Canada in coming days regarding a trade deal with the United States. Another announcement on this front will send the U.S. indices even higher, bringing a rush of bids to the U.S. equities markets.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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