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USMCA Trade Deal 'Within Range': ETFs to Benefit

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Apart from the U.S.-China trade dealings, another trade negotiation is also hogging investors’ attention — the United States-Mexico-Canada (USMCA) deal. Speaker Nancy Pelosi said on Nov 25 that the deal is ‘within range’ and House Democrats and the Trump administration have resolved their issues on the USMCA but a final review is still to be done.

Trump has time and again accused Democrats of obstructing a vote on the accord for not letting him see a political win.Mexico's government built pressure on Democratic lawmakers as the country's exports and foreign direct investment are largely dependent on free access to the U.S. marketplace.

The USMCA deal will rewrite the North American Free Trade Agreement or NAFTA that had tied up the United States, Canada and Mexico for more than two decades. The deal will allow smooth business conditions for manufacturers and farmers.

The deal will also allow U.S. dairy farmers access to 3.5% of the Canadian dairy market, while capping Canada’s car exports to its southern neighbor. Canada has also agreed to limit its auto exports to the United States to 2.6 million vehicles. This will help Canada evade a 25% U.S. tariff on auto imports in case the Trump administration goes on to impose such a duty. The stated level crosses Canada’s current production level of around 2 million units(read: United States-Mexico-Canada Deal Puts These ETFs in Focus).

If the deal is reached soon, these ETFs will benefit.

Corn

Per analysts, one of the main beneficiaries of the deal is likely to be corn. This is because traders now expect the agricultural industry to benefit from the USMCA deal. Since Mexico is one of the largest purchases of American corn, this soft commodity should pick up. Teucrium Corn ETF (CORN - Free Report) is thus set to soar.

Auto

Auto stocks were in a tight spot following Trump’s presidential victory. This was because Trump was expected to take stricter steps on immigration and outsourcing. Companies like Ford Motors (F - Free Report) and General Motors (GM - Free Report) outsource their car production to Mexico.

So, with the deal signed with Mexico, auto ETF First Trust NASDAQ Global Auto ETF (CARZ - Free Report) will likely gain. Canadian auto suppliers should also surge after the U.S.-Canada free-trade deal as it will erase auto tariffs (read: Tit-For-Tat Tariffs Hurting U.S. Automakers: ETF in Focus).

Mexico

Trump’s win in the U.S. presidential election has been a pain for several foreign country investing. But it was Mexico that faced the maximum wrath. Needless to say, the country ETF iShares MSCI Mexico Capped ETF (EWW - Free Report) will profit from the treaty.

Canadian Currency

Along with Mexico, the Canadian currency will benefit from the new treaty. Invesco CurrencyShares Canadian Dollar (FXC - Free Report) thus comes into focus.

Livestock

The livestock industry came under pressure in the middle of 2018 as U.S. pig farmers were subjected to retaliatory pork tariffs from Mexico. Since Mexico is the largest buyer of U.S. pork based on volume, the tariffs were deemed as a major setback for American meat producers. Last year, more than 40% of U.S. pork exports went to Canada and Mexico. So, one can have a look at livestock ETN iPath Series B Bloomberg Livestock Subindex Total Return ETN (COW - Free Report) .

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