August 2018 Economic Recap
The U.S. and Mexico agreed to a new trade agreement to potentially take the place of NAFTA. The deal sets up some more stringent requirements for automobiles sold in the U.S. and Mexico. Namely, 75% of the value added to each vehicle must take place in either the U.S. or Mexico, 45% of a vehicle’s value must be made in areas in which workers are paid at least $16 an hour, and there must be an increased effort to source input materials from both countries. Talks remain ongoing with Canada about inclusion in the NAFTA replacement deal with the U.S. threatening to leave the country out of the agreement should it not meet their demands on things such as expanded access to Canada’s dairy market.
Emerging markets were rattled by a renewed bout of significant currency depreciations. Turkey, Argentina, Indonesia, amongst others, were all negatively impacted by such events. The specific circumstances in each country vary; Argentina’s was driven by fiscal mismanagement while Turkey’s was linked to unstable political and monetary institutions. However, all such vulnerabilities were exacerbated by rising interest rates in the U.S., which has driven capital flows from EMs back to developed markets.
For a deeper consideration of the economic data released during August, please follow the links below: