Despite outwardly optimistic appearances from Canada’s Freeland, talks between Canadian and U.S. trade negotiators reportedly turned sour last night and Trudeau government officials are now expressing concern that a final NAFTA deal will not be concluded on Friday.

“That was a long, intensive conversation with Ambassador Lighthizer and his team. The atmosphere remains constructive. …We are making progress,” Ms. Freeland said after a session that ended at 8:30 p.m.

She returned at 10:15 p.m. for another meeting that lasted just five minutes. Ms. Freeland told reporters that she had “a couple things to say” to Mr. Lighthizer and she would meet him again Friday.

According to The Globe reports, USTR Lighthizer has refused to budge on eliminating Chapter 19 – which allows Ottawa to challenge punitive American tariffs on imports before binational panels – and refusing to keep current cultural protection provisions in a redrafted North America free-trade agreement.

Ms. Freeland, who said on Thursday a deal is possible, had offered the Americans concessions on increased U.S. dairy exports to Canada U.S. and on intellectual property, but Mr. Lighthizer was unwilling to offer any concessions of his own on the two key Canadian demands.

However, it’s not all ‘give’ from Canada, as they are reportedly holding the line on Buy American demands, telling the U.S. that it must have the same access to bid on U.S. govt contracts or will impose Buy Canadian provisions on U.S. firm.

As The Globe reports so ominously:

There is now deep concern within the Canadian negotiating team that the talks which continue this morning will end in failure. 

However, on the back of The Globe’s ‘sources’, the loonie is slipping lower – erasing all the early week hope-filled gains…

1.3050 seems like a line in the sand for the Loonie for now, any further negative headlines and a break of that level will push the canadian dollar notably lower.

Finally, we note that Citi points out that sources have been saying all sorts of things, with some suggesting there’s been enough progress, and we note that officials also cautioned that U.S. President Trump hasn’t yet signed off on any of the measures agreed upon so far and could reject any trade-dispute mechanism if the U.S. suddenly changes its hardline stance.

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