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How NAFTA uncertainty can hamper corporate investment

The uncertainty of the North American Free Trade Agreement (NAFTA) deal and the impending US corporate tax cuts could send firms holding off investments into the United States, a chief executive of a Canadian automaker said.

In a report on Reuters, Magna International CEO Don Walker said, “I think anybody that is contemplating any big investments over the long term is probably either waiting or they are going to be biased to invest more in the U.S. until there’s an outcome here.”

To recall, US President Donald Trump expressed intentions to withdraw from the NAFTA, a deal which automakers that have operations spread across the three countries rely on. The US president has proposed changes to the rules of origins for autos, a move that was viewed as flawed for automakers in the two other participating countries.

Meanwhile, Canada-based food companies could face increased costs should US decided to cut ties to NAFTA. Industry experts quoted in a report on The Western Producer said border problems will be costly for all the parties involved.

They explain that some of these firms may probably shift their focus to non-US markets for future growth. They noted that Canada may be able to benefit from its new trade deal with the European Union.

Groupe AGECO economist Bertrand Montel said food firms need to go through their supply and processing chain to determine which factors may deeply be affected by a sudden demise of NAFTA.

“I would encourage processors to have a quick assessment of their products,” Montel said.

While small border tariffs are not the biggest factor threating these firms, the ability of US players to manoeuvre border blockages is a bigger threat.

Financial institutions are also concerned with the trade deal’s unpredictable future. “The discussions around the free trade agreement I would say right now are concerning. We’ve done an analysis of our book. We know where we are sensitive in terms of the NAFTA agreement and customers know their sensitivities as well,” HSBC Canada CEO Sandra Stuart told Reuters.