Canada officials said to see rising odds Trump leaves Nafta

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Canada officials said to see rising odds Trump leaves Nafta

Canadian officials are tamping down speculation that President TrumpDonald John TrumpHouse Democrat slams Donald Trump Jr. for "serious case of amnesia" after testimony Skier Lindsey Vonn: I don't want to represent Trump at Olympics Poll: 4 in 10 Republicans think senior Trump advisers had improper dealings with Russia MORE will soon withdraw the United States from the North American Free Trade Agreement (NAFTA).

The sixth round of talks is set to begin January 23 in Montreal.

The February gold contract gained US$5.60 to US$1,319.30 an ounce and the March copper contract added two cents to US$3.24 a pound.

The report briefly roiled the Canadian dollar and stocks and pushed down the Mexico peso - providing a look into what might happen if Trump follows through on his previous threats to leave NAFTA.

General Motors Co. slid as much as 3.3% while auto-parts stocks also fell, paced by Lear Corp. down as much as 3.8% and Magna International Inc. down 4.9%.

The Mexican peso is down 0.85% at 19.4034 per dollar. The rate on Canada's two-year government bonds declined 6 basis points to 1.74 per cent. It is more likely a "zombie NAFTA" will continue even if Trump pulls out, as such an action could be held up in the US court system and members of congress would have to authorize the addition of new tariffs on goods from Canada.

"The market's been too complacent regarding Nafta termination risk for too long", said Bipan Rai, a Toronto-based foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce.

Canada, along with Mexico, has so far rejected some of the Trump administration's hardline demands and refused to offer counter-proposals - and warned there won't be a deal unless the United States puts water in its wine.

CIBC chief economist Avery Shenfeld says a Bank of Canada interest rate hike next week is not a given.

Canadian officials say if Trump does announce a USA withdrawal, it could be a negotiating tactic created to win concessions. A party's withdrawal takes effect six months after it provides written notice to the other member countries.

"What isn't clear is whether six months down the road this means the end of Nafta, or does Congress stall, does Canada play for time?"

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