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THE DAILY MACRO BRIEF: Customs duties, Trade talks, ACEUM, Brexit...

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05/22/2019 | 08:13am EDT

Trade tensions are affecting global growth, worrying US industries and leading to relocation. The free trade agreement between the United States, Mexico and Canada is on standby. Theresa May made compromises to get a majority in the British Parliament.

Trade war and customs duties. Donald Trump's decision to raise tariffs on $200 billion worth of products imported from China by 10 to 25% is a concern for both American companies and shoe manufacturers. Adidas, Nike, Puma and 180 other industry players sent a letter to the president calling on him to lift additional tariffs, which they consider "catastrophic for American consumers". Indeed, as importers pass on customs tariffs to customers, the Federation of the American Footwear Distributors and Retailers (FDRA) indicates that this surtax would represent an additional cost of $7 billion for their customers. In addition, these mutual duty increases on Chinese and American products lead American companies (three-quarters according to the American Chamber of Commerce in China) present in China to relocate (but not to the United States).

When is the Canada-USA-Mexico Agreement (ACEUM) due? Despite the lifting of tariffs on Canadian and Mexican steel and aluminum, the free trade agreement between Washington, Ottawa and Mexico City is still awaiting ratification in all three countries and faces some obstacles, said Steny Hoyer, leader of the Democratic majority in the House of Representatives, said he would like to get a yes from Democratic elected officials. “But we are not there yet”. Canadian Prime Minister Justin Trudeau says that now the US metals tariffs are gone, he’s looking forward to getting the new trade deal ratified. On May 30, US Vice President Mike Pense will travel to Canada to meet Justin Trudeau and move ACEUM forward as quickly as possible.

New proposals to break the deadlock on Brexit. Theresa May is considering a second referendum if British MPs approve the Brexit agreement she will present in early June. After three rejections by elected officials, the chances of them voting in favor of the withdrawal agreement are slim, which is why the British Prime Minister has indicated that she has made some compromises to obtain a majority of the votes. Indeed, wishing to rally Labour to her side, after more than a month of fruitless talks, Theresa May sent a letter to Jeremy Corbyn informing him of the concessions she had adopted, such as maintaining a customs union with the EU, and inviting him to support the proposed new withdrawal agreement. "I have demonstrated today that I am willing to make compromises to carry out Brexit on behalf of the British people," she revealed in her letter. For its part, Ireland considers the new Theresa May Agreement "acceptable", said Irish Head of Government Leo Varadkar.

In other news. Beijing is willing to continue trade talks with Washington said the Chinese ambassador to the United States. Today, the Federal Reserve's Monetary Policy Committee (FOMC) will release the minutes of its last meeting. Consumer confidence recovered slightly in the euro area, from -8 to -7. Japan's trade deficit is lower than expected at -110.9 billion yen (compared to -154.3 in March). Yesterday, the OECD once again lowered its prospects for global economic growth, due to escalating trade disputes. The Italian National Institute of Statistics has revised its growth forecasts for 2019 sharply downwards. On day before the first votes in the European elections, tomorrow the British and Belgians will go to the polls to elect the MEPs.

Stocks mentioned in the article
ChangeLast1st jan.
EURO / CANADIAN DOLLAR (EUR/CAD) 0.34% 1.46757 Delayed Quote.-6.59%
LME ALUMINIUM CASH 1.32% 1726 End-of-day quote.-7.10%
US DOLLAR / JAPANESE YEN (USD/JPY) -0.17% 108.35 Delayed Quote.-0.95%

Romain Fournier
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