GM Stock Gains 1.57 Percent On New NAFTA Trade Deal
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Shares of General Motors Company barreled higher in Monday trading after the U.S. and Canada struck a new North American Free Trade Agreement (NAFTA), now officially known as the United States-Mexico-Canada agreement.
GM stock closed Monday (October 1st, 2018) at $34.20 per share, 1.57 percent higher than it opened that morning, but shed $0.15 (0.44 percent) in after-hours trading.
The new agreement ends months-long negotiations between the United States, Mexico and Canada, putting to rest significant uncertainty and doubt surrounding free trade in the North American region. In addition, the agreement also significantly reduces the possibility of tariffs on imported cars. Notably, the U.S. and Mexico were first to have reached a deal in late August, putting pressure on Canada to reach a deal of its own.
Chevrolet Cruze compact cars await customers at a Chevrolet dealership; some Cruze models sold in the United States are currently made in Mexico
The stock rally wasn’t exclusive to GM, as U.S. manufacturing firms, including all three U.S. automakers, saw the value of their shares rise. Energy companies also saw gains in share value as crude oil and natural gas reached their highest prices in years. The rally ran out of steam as the day went on, as U.S. crude oil reached its highest price in almost four years, leaving major indexes mixed.
Most investors and analysts see the new trade deal not as a major overhaul of NAFTA, which was established in 1994, but rather as an update of sorts. The treaty calls for a higher percentage of auto content to be made in the United States and for an increase in wage standards for imported content.
Congress, which must approve new agreement, isn’t expected to review the new deal until December.
The GM Authority Take
GM stock needed this rally, and it needed it bad. In fact, GM shares were sitting just off their 52-week low prior to the Monday rally.
Even better is that The General – along with the auto industry at large – can now make plans for vehicle assembly, parts sourcing, production and labor with certainty – which is always a good thing.
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Back to work now this is all in place.
Glad NAFTA is finally dead.
Some of you guys were right. Canada capitulated pretty quickly after their initial refusal to participate. I guess pragmatism finally overcame Trudeau’s petulance and impotent anger. The people of Canada will be better for it in the long run.
A big relief for all automakers with plants in North America. Just to keep track of tariffs on components going back and forth over border lines would have been very expensive.
Looking at China
Our trade dispute with China is still a problem for GM, and others. While the administration continues to focus on our trade deficit in terms of dollar amount, they ignore the business of SAIC-GM, building and selling 3 million vehicles in China every year with continued substantial growth. This JV continues to be a very good situation for both the US. and China. Therefore, China is still helping our auto industry, in a big way, without offsetting the trade deficit numbers.