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  • Whither NAFTA
  • Markets at a glance
  • What to watch for today

The views on NAFTA

Bay Street economists have three slightly different views of President Donald Trump trash-talking Prime Minister Justin Trudeau, Foreign Affairs Minister Chrystia Freeland and NAFTA.

As The Globe and Mail’s Adrian Morrow and Michelle Zilio report, Mr. Trump told reporters Wednesday that he refused to meet Mr. Trudeau ahead of a Sept. 30 NAFTA deadline, loathes Canada’s negotiating style, and doesn’t like Canada’s negotiator.

While he didn’t name the negotiator, he was, presumably, referring to Ms. Freeland, who has led the Ottawa side of the negotiations.

The Americans set the deadline for Canada to sign on to a pact between the U.S. and Mexico, one that would replace the North American free-trade agreement. Talks appear deadlocked, with Mr. Trump saying he wants a fair deal, and Mr. Trudeau saying that no deal is better than a bad one.

President Donald Trump speaks during a news conference at the Lotte New York Palace hotel during the United Nations General Assembly, Wednesday, Sept. 26, 2018, in New YorkEvan Vucci/The Associated Press

Mr. Trump said he shunned Mr. Trudeau “because his tariffs are too high and he doesn’t seem to want to move, and I’ve told him ‘forget about it.”

Mr. Trudeau’s office, in turn, said the Prime Minister never asked to meet.

Canada and the U.S. are engaged in a tariff war, with the Americans slapping levies on aluminum and steel, sparking retaliation from Ottawa, and Mr. Trump threatening to hit auto exports in the absence of a deal.

“We’re very unhappy with the negotiations and the negotiating style of Canada,” Mr. Trump lamented. “We don’t like their representative very much.”

Economists have three ways of looking at this:

1: It’s not good.

2: Relax, it’s just Trump being Trump.

3: It’s what’s supposed to happen in the heated hours before a negotiating deadline.

Here’s what they said after Mr. Trump’s attack on Canada.


“Two words – not encouraging,” said Bank of Montreal chief economist Douglas Porter.

“Especially given there’s now less than 100 hours left in the month (i.e., before the U.S./Mexico deadline they have set for us)."

Prime Minister Justin Trudeau looks on as Foreign Affairs Minister Chrystia Freeland responds to a question during a panel discussion at the Council on Foreign Relations in New York, Tuesday, Sept. 25, 2018Adrian Wyld/The Canadian Press

It’s not the first deadline, and we’ll see if it’s indeed the last. The idea is that the Trump administration will take the U.S.-Mexico deal to Congress if Ottawa doesn’t come on board by the weekend.

Analysts have suggested a remade Congress, after the November midterm elections, could tie the administration’s hands.

But Mr. Trump could carry through with his threat to hit Canadian auto exports with hefty tariffs, dealing the economy a crippling blow. Ontario would be especially hard hit.

Mr. Trump’s harsh comments “may be a way of masking that Canada may have scored a minor tactical victory for now,” Mr. Porter said.

But “prior to the agreement with Mexico, Trump was talking fondly about Mexico and its leaders for weeks and weeks – so there was no last-minute slagging in those negotiations,” he added.

“Which is why I wouldn’t just shrug this off.”

This is all affecting the Canadian dollar, of course, added Bipan Rai, CIBC’s North America head of foreign exchange strategy.

“Investors have to assess a constructive fundamental backdrop here in Canada, with the possibility that the trade and investment environment might be changed significantly if Canada is excluded from the US/Mexico deal,” he said.

“Even worse - the possibility of auto tariffs and the impact that would have on the Canadian economy.”


Avery Shenfeld, the chief economist at Canadian Imperial Bank of Commerce, didn’t watch Mr. Trump’s news conference, but said that “we are learning to tune out the threats and bullying, and wait patiently to see what the professional negotiators can come up with.”

It’s true that Mr. Trump has what can best be described as a different style than his predecessors, one that has set world governments on edge as he pushes his “America first” agenda.

But he has carried through on these threats since Day One, which could indeed mean NAFTA is on its deathbed.

Not only that but Mr. Trump obviously sets the marching orders for U.S. Trade Representative Robert Lighthizer, his team’s chief negotiator and the official who has met most with Ms. Freeland.

Mr. Lighthizer has said Canada and the U.S. are divided on a dispute-settlement mechanism and Ottawa’s dairy regime, and “we’re sort of running out of time.”


“I think it’s precisely the sort of rhetorical flourish one should expect at this stage in the negotiations,” said Brett House, Bank of Nova Scotia’s deputy chief economist.

“It is symmetric to Canada’s government saying it won’t sign a bad deal,” he added.

“The public statements around trade negotiations are often most dire right before an agreement is reached. This was certainly the case for both [the original Canada-U.S. free-trade pact and Ottawa’s recent deal with Europe].”

This is true, of course.

But also true is that there was no Twitter at the time of the Canada-U.S. agreement.

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Markets at a glance

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What to watch for today

Markets will be looking for clues from Bank of Canada governor Stephen Poloz, who gives a speech in Moncton, N.B., Thursday.

He’s scheduled to speak about disruptive technologies, but investors will watch for signals, nonetheless, given that observers expect the Canadian central bank to lift its benchmark rate again at next month’s meeting, particularly after Friday’s above-target, if easing, reading of inflation.

Bank of Canada governor Stephen PolozChris Wattie/Reuters

“We will be attentive for any comments regarding the BoC’s assessment of inflation after the release of August [inflation],” Citigroup’s Veronica Clark and Dana M. Peterson said in a lookahead.

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Editor’s note: Canada's Prime Minister is Justin Trudeau. A previous version of this article incorrectly identified him as his late father, Pierre Trudeau.