Markets were rattled this week after news broke that Canada expected President Trump to pull out of the North American Free Trade Agreement (NAFTA). The deal, which has been in place since 1994, lowered trade barriers between the U.S., Canada, and Mexico and has boosted U.S. exporters and made goods cheaper for consumers. However, these benefits came at the cost of increased competition for domestic American industries, especially manufacturing.
This has lead President Trump to make retooling NAFTA a cornerstone of his trade policy, which he reiterated again this week. These fears knocked the Canadian dollar sharply lower on Wednesday, falling near 79.5 cents per U.S. dollar.
Meanwhile, lumber futures rose to an all-time-high. The U.S. is heavily dependent on lumber imports from Canada, and a new NAFTA deal could raise tariffs, and thereby lumber prices.
If the deal is renegotiated, the U.S. agricultural sector potentially has more to lose than any other group, as exports to Canada and Mexico have become a major foundation of the agricultural economy. However, President Trump pledged to support farmers and score “even more victories for the American farmer and the American rancher,” in new negotiations, which has kept agricultural markets soothed for the time being.