Canada, U.S. Trade Agreement Likely, Eventually, says Nomura
Nomura has said it expects Canada to ultimately secure a trade agreement with the United States, but it added the most plausible outcome of the CUSMA renegotiations will involve the creation of a more conditional framework that preserves the core of the existing deal.A shift to annual reviews or narrower exemptions would institutionalize volatility and weigh on growth, but less so than in the case of a complete rupture, wrote the bank in a recent note,Downside risks remain elevated, said Nomura, noting talks between the United States and Canada appear to be moving more slowly than those between the U.S. and Mexico; several bilateral trade irritants remain unresolved' and U.S. President Donald Trump has threatened additional levies on Canada in connection with any future trade deals it does with China.Nomura believes both sides have an incentive to strike a deal. A full breakdown in talks would likely push Canada into recession, as Canada cannot meaningfully diversify from the U.S. in the near term, it said. The U.S. also has reason to avoid a more inflationary and disruptive outcome given domestic affordability concerns, it added.