These Three Amigos Can Boost Your Portfolio

by James Hires

The Three Amigos

The U.S., Mexico and Canada are the rebellious children of Europe's empires. Because of that, there's a certain kinship among them.

That kinship led to the creation of the North American Free Trade Agreement (NAFTA) in 1994. NAFTA brought all three economies closer together.

It's been an economic boon.

America's 2018 GDP was nearly triple what it was in 1994. Mexico's and Canada's GDP each more than doubled in the same time span.

The U.S., Canada and Mexico are one another's largest trade partners. Mexico and Canada ranked No. 1 and No. 2, respectively, in total trade value with America last year.

But the agreement has its problems. It's inflexible and weak on important regulations. It was never meant to be adjusted or renegotiated.

Trump's proposed replacement for NAFTA fixes those problems.

The United States-Mexico-Canada Agreement (USMCA) is stronger on labor and environmental regulation. It also has stronger intellectual property laws.

It's far nimbler than its predecessor too. NAFTA was designed to go on indefinitely. The USMCA has to be renegotiated every six years. That leaves it better able to respond to change.

Further, there are restrictions for members seeking to sign trade agreements with "non-market" countries. That language is aimed squarely at China.

The USMCA hones North America into a potent weapon against China.

China paints a mighty picture of itself. But there's more to it than meets the eye.

It has serious problems, namely food security, energy independence and demographics.

They will undermine China's strength moving forward.

The U.S., Mexico and Canada have none of China's problems, and the USMCA will only help matters. These countries are growing in both wealth and population. And Mexico isn't far off from first-world status.

The U.S., Mexico and Canada will be better investments than China in the long term. ETFs like the iShares MSCI Mexico ETF (NYSE: EWW) and the iShares MSCI Canada ETF (NYSE: EWC) could be good ways to profit from the USMCA deal.

Good investing,


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