In terms of jobs, the agreement appears to be “much ado about nothing,” said Mark Zandi, chief economist at Moody’s Analytics.
“It won’t materially change the U.S.-Mexican trade balance or increase trade between the two countries,” Zandi said in an e-mail. “Like the trade deal with the EU, the U.S.-Mexican deal is a face-saving way to cool the brinkmanship. It doesn’t move the dial for either the U.S. or Mexican economies.”
“The U.S. gross domestic product and job impacts will be on the margin. And this assumes that the U.S. is able to strike a similar deal with Canada. If not, it could disrupt manufacturers supply chains, particularly for automakers whose supply chains extend across North America.”
Indeed, the administration’s attention is now turning to trying to get Canada to agree to a revision of NAFTA, a name the president says he wants to scrap as part of the talks. Officials in Washington are hoping to make a deal by Friday.
But Wall Street analysts did little to encourage speculation that the deal will boost automakers’ profits.
Morgan Stanley’s Adam Jonas, a voluble media presence on auto issues, didn’t issue a report on the deal and declined to talk about it. Instead, he published a report saying that slowing consumer spending in China could hurt profits at General Motors.
If tariffs on steel and aluminum remain in place, as the administration said, the earnings pressure that caused shares of GM and Ford to tank after second-quarter results came out in July will still be there, CFRA Research analyst Efraim Levy said in an interview.
But he said automakers would benefit from greater certainty about what the rules will be, even if the companies don’t like specific provisions. The full impact won’t be known until agreements are reached with Canada and the European Union, he said.
“Every agreement (gets done) in pieces that have to fall into place,” he said. “The auto makers and parts suppliers have gotten whacked this year on trade issues. Once you have a level of certainty, you can manage for it.”
Source : CNBC
