U.S. Auto Sector Rises After U.S.-Canada Agreement

Automobile manufacturers Ford Motor Company (NYSE:) and General Motors (NYSE:) rallied Monday after the United States and Canada struck a last-minute deal to replace the North American Free Trade Agreement late Sunday night.

General Motors shares rallied 1.8 percent in premarket trading Monday, while Ford rose 2.1 percent. Parts manufacturer Lear Corporation rose 3.5 percent.

USD/CAD for Oct. 1, 2018.

USD/CAD for Oct. 1, 2018.

The pending United States-Mexico-Canada Agreement is expected to impact the auto industry most, requiring a greater portion of vehicles to be made in North America and establishing a minimum fixed wage level for car manufacturers.

The USMCA also includes a concession by Canada to effectively cap its automobile exports to the U.S.

USD/MXN for Oct. 1, 2018.

USD/MXN for Oct. 1, 2018.

For Ford and GM, the new agreement likely comes as a relief after U.S. President Donald Trump threatened in May to tax all auto imports in an attempt to safeguard national security.

Tariffs would have been a negative for both manufacturers, according to Moody’s analysis, since 30 percent of GM’s U.S. unit sales depend on imports from Mexico and Canada, while 20 percent of Ford’s domestic unit sales depend on such imports.

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