MEXICO: JP Morgan Says Tariff Threat Could Delay USMCA Renegotiation Until 2027
Jul-17 14:09
- In JP Morgan’s view, the 30% tariff threat on Mexico was intended to ensure that the government of President Sheinbaum acts decisively and offer further results on cartel extraditions and fentanyl seizures before Aug 1. However, the lingering tariff threat on Mexico will only complicate the impending USMCA review set to intensify in 4Q.
- It remains unclear if the US will stick to the 30% general tariff, or if it will only apply to non-compliant USMCA exports given the progress made on both drug trafficking and deportations. At any rate, the average rate for Mexico is too high for a free-trade agreement partner.
- Adding this week’s 17% levy on tomatoes, the average tariff is probably near 7%, and the fact that uncertainties continue to arise within USMCA partners will further dent the region’s investment outlook.
- As tensions arise, the implications for the USMCA review remain unclear but are increasingly critical. It is difficult to anticipate a swift revision and JPM now expects an in-depth revision that would take longer to be resolved, potentially until 2027.
- Whether the process results in targeted amendments or veers into full renegotiation will depend on the political calculus and Mexico’s ability to deliver progress in areas like security, energy, pharma, government procurement, and regulatory transparency.
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BONDS: Away From Highs After U.S. Data & Crude Uptick
Jun-17 14:04
{WO} BONDS: Bonds have traded away from session highs following the U.S. data, as the firmer-than-expected retail sales control group and import prices data countered the initial dovish reaction to softer-than-expected headline retail sales & negative revision.
- A move back towards session highs in crude oil futures also factors in.
- Some focus on a QatarEnergy instruction for ships to wait outside the Gulf until the day before loading, as markets continue to assess energy supply risks stemming from the Iran-Israel conflict.
- Gilts continue to set up for tomorrow’s UK CPI data, where we see downside risks to the headline CPI and services readings.
- Our full data preview is here.
- 48.5bp of BoE cuts priced through year-end, with the next 25bp cut more or less fully discounted through the end of the September MPC (pricing little changed on the day).
- Tsys bull flatten on the day, Bunds twist flatten and gilt see light bear steepening.
MNI: US APR BUSINESS INVENTORIES +0.0%; SALES -0.1%
Jun-17 14:00
- MNI: US APR BUSINESS INVENTORIES +0.0%; SALES -0.1%
- US APR RETAIL INVENTORIES +0.0%
MNI: US NAHB HOUSING MARKET INDEX 32 IN JUN
Jun-17 14:00
- MNI: US NAHB HOUSING MARKET INDEX 32 IN JUN
- US NAHB JUN SINGLE FAMILY SALES INDEX 35; NEXT 6-MO 40
