Canada’s auto stocks spike after U.S., Mexico announce trade agreement

TORONTO – Canadian automotive stocks rallied Monday after the U.S. and Mexico announced they have reached a bilateral “understanding” on a trade agreement.

Shares in companies including Linamar Corp., Magna International Inc. and Martinrea International Inc. were up despite U.S. President Donald Trump’s threat to impose tariffs on automotive imports from Canada if a deal can’t be reached.

READ MORE: Trump announces new U.S.-Mexico trade deal, wants to eliminate NAFTA

Martinrea was up 6.26 per cent, Linamar was up 6.61 per cent and Magna was up 4.81 per cent in mid-afternoon trading on the Toronto Stock Exchange.

The preliminary agreement between Mexico and the U.S. includes a provision that 40 to 45 per cent of auto content would be made by workers earning at least US$16 per hour, as well as 75 per cent of auto content be made in the U.S. and Mexico, according to a brief from the U.S. Trade Representative.

WATCH: Trump announces United States/Mexico trade agreement, says NAFTA is over

0:40 Trump announces United States/Mexico trade agreement, says NAFTA is over

If auto content and wage agreements go forward with Canada on board as well, it could stem the flow of auto sector jobs to lower wage jurisdictions, Unifor president Jerry Dias said.

“I believe this should stop the bleeding in Canada.”

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Dias said he was concerned Trump linked potential tariffs on Canada’s auto sector with concessions on the agricultural supply management system, but said it was nothing new.

“It’s a lot of rhetoric, but ultimately he’s doing the rhetoric that he’s been doing since the beginning, that he’ll slap on tariffs if we don’t make some major moves on the importing of their agricultural goods.”

WATCH: What’s next for NAFTA?

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Bill Anderson, director of the University of Windsor’s Cross Border Institute, says he’s concerned about a condensed negotiation window now that key issues between the U.S. and Mexico look to be settled, but that the wage provision would help Canada’s sector.

“Essentially it’s a way of excluding Mexican content, so even though Canada and Mexico have presented a united front, you now have a situation where you could make the argument this will benefit Canada,” said Anderson.

“On that particular issue, what benefits the United States also benefits Canada.”