Having the reset of NAFTA (its 2.0 or a truly new agreement as you wish to term it) was key. And that leaves China as sort of odd man out, writes Gene Inger this week.

That’s even if a slew of arguments will be made about global trading relationships related to the USA’s own needs for its people after decades of opening doors that helped others so much. And that’s fine. But our workers matter too.  

Sure, I have thought Trump’s approach was unnecessarily belligerent from time-to-time. And how they handled South Korea was more like how China might have responded, if they were treated in a more statesmanlike way. It is essential that all sides save face to make a deal. So I suspect that’s next.

chart 1 

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Meanwhile the actual Canada deal is seriously better for Americans and it is not bad for Canadians either. It’s just ironic that nobody mentions that it wasn’t always so lopsided, until the Loonie (CAD) dropped relative to the U.S. dollar (USD).

In the new deal, there is opportunity to review it every six years. That’s a plus too and will allow for variations or modifications depending on forex shifting.  

chart 2 

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Now the key (besides China), you have a remaining gap there. And a vulnerability of course simply because the markets are so extended, rotation effort put aside, as we’ve suspected they could only do so much. Government has functioned in the current case, regardless of Trump’s vitriol, and balance is on the way to being restored.  

That’s basically what you have: tax cuts, some reform (more really is needed); regulatory streamlining (both good and bad in various areas as you know) and more optimism.

chart 3

What’s needed now: corporate confidence to expand CapEx, and regardless of personal views; that’s likely enhanced with the present trade deal, and particularly if China gets onboard soon.

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