The week ahead for American investors is a time to consider foreign relations. The Trump Administration faces two important deadlines; one self-imposed the other it inherited.
On Monday, U.S., Canadian and Mexico trade authorities are due to meet for another round of talks about the North American Free Trade Agreement. As a candidate Trump threatened to tear up the 1994 deal. Instead, U.S. Trade Representative Robert Lighthizer has been meeting with our neighbors regularly since August. He wants a deal this month in order to get it to Congress before the 2018 elections.
Autos, agriculture products and an exit clause are among the sticking points. American negotiators want the trade pact to expire after five years unless the three countries agree to extend it. Businesses worry such a sunset provision would discourage investment. Instead, Mexico and Canada have pushed for a review every five years, but not a mandatory renegotiation.
Canada and Mexico are the biggest markets for U.S. products and services. Together they account for a third of all American exports _ more than the next 10 biggest trading partners combined. The three economies are linked no matter the political soapboxing.
The administration faces a different deadline on Saturday. That's when the president must decide if the U.S. will waive economic sanctions against Iran for another six months. This is part of the Iran nuclear deal which Trump has called "the worst deal ever."
Since the lifting of sanctions, Iranian oil production has bounced back. It is now producing 3.8 million barrels per day _ 10 percent of what comes from OPEC nations.
Prices for American petroleum are close to three and a half year highs. The oil rally comes even as U.S. production hits record highs, and demand remains steady. Sure, some of the oil rally could be blamed on anticipating a busy summer vacation season, but there is no denying worries are building in the market over global oil supply with the tough talk regarding Iran.
Long-term investors have to learn how to stomach political rhetoric and separate that from economic fundamentals. The two could collide in the week ahead.
