Auto stocks get a boost after the US and Mexico reach an agreement on parts of NAFTA

Donald Trump models a hard hat in support of coal miners during a 2016 campaign rally in Charleston, West Virginia.

caption
Donald Trump models a hard hat in support of coal miners during a 2016 campaign rally in Charleston, West Virginia.
source
Mark Lyons/Getty Images

  • Ford, GM, and Fiat Chrysler – the US’s largest automakers – all got a boost Monday following the announcement that the US and Mexico reached an agreement on parts of NAFTA.
  • The new rules could require 75% of a vehicle be sourced from a NAFTA nation, and up to 45% be made by workers receiving $16 per hour.
  • President Donald Trump had previously threatened new tariffs on Canadian vehicles if no agreement was reached.

Shares of the largest US automakers got a boost Monday after President Donald Trump said the US and Mexico have reached an agreement on elements of NAFTA, marking a significant step toward reshaping the landmark trade deal.

Canada – which Trump had previously threatened with possible tariffs on cars coming to the US – was notably absent from the agreement.

A major part of the agreement surrounds import taxes on cars. Among the negotiations was a US push to increase the percentage of a car that had to be sourced from a NAFTA nation to move freely across the border of the three NAFTA nations. That percentage will be increased to 75% from 62.5%.

Here’s how the stocks responded:

The new agreement – pending the required signatures – could also change the proportion of a car that must be made by workers who are paid $16 per hour or more. According to Reuters, 40% to 45% of the car must be made by these higher-wage workers to move between the NAFTA countries without facing a duty.

Trump praised the deal at the White House on Monday, saying the new agreement would be “tremendous” for US farmers and workers. Trump has longed pushed for the renegotiation of NAFTA, saying the current deal is the “worst trade deal in the history of our country.”

Auto companies have been particularly at-risk from the President’s rhetoric surrounding trade in recent months, and previously spoke out about new taxes on imported metals that could hurt their bottom lines.

Bob Bryan contributed to this report.