Uncertainty over the North American Free Trade Agreement as Canada, Mexico and the U.S. negotiate the 24-year-old agreement could have an adverse effect on trading portfolios, according to investment banker Stefan Selig.
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“It’s NAFTA because Canada and Mexico are fundamental allies,” Selig, undersecretary of commerce for international trade under President Barack Obama, told Liz Claman on FOX Business. “They are market economies, and we actually have a pathway to a modernized agreement that should be attainable.”
In 2016, S&P 500 companies derived about 43% of their revenue from outside the U.S., compared with 44.3% in 2015.
NAFTA is likely to have a bigger near-term effect on portfolios than China, according to Selig. U.S. negotiations with China are more difficult and likely to take more time, he said. Delegations from both countries are meeting in Washington this week after discussions stalled in Beijing.
“I’d be more focused on a successful NAFTA outcome, which sadly is unlikely to happen in the immediate term,” Selig said.
He said that the July 1 election in Mexico will make the government in Mexico City less amenable to change and that an agreement will probably be elusive in the months ahead. House Speaker Paul Ryan warned a new NAFTA deal had to be drawn up by May 17 before new lawmakers could change the political calculus, but talks remained stuck on key issues on Thursday.
“I’m fearful that if we miss this deadline, it’s at earliest going to be a year-end event,” he said.