Obviously, if nafta were to collapse, canada has a bilateral trade deal with the u. S. What is the canadian priority here . Would it prefer to fall back to that . When the minister started talking about arlington cemetery, that was a metaphor for the death of nafta. Canada would probably be the least disrupted. It would be a shortterm pickup. Canada can fall back on the Free Trade Agreement with United States. There may not be that much of a disruption. Backandforth, the unconditional proposals, make a good agreement better. Some of these proposals run counter to rules. And we had the mexican representatives saying we will need to a knowledge we have limits. Are we going to be will to resurrect nafta or is the United States justifying a way to get out of this . Dollar is the billion question with mexico. We dont know where they are going with this. They have extended the talks. They do want to make progress. Donald trump keeps saying it is a bad deal. Robert today highlighted all the problems the administration sees with the deal but the nonstarting proposals seem to come from the United States. The other two countries are saying we cant walk backwards. ,hey did try to talk about other areas were countries were not giving ground but it is the u. S. That has given nonnegotiable things on the table. To look at the markets, we havent done that, we have dollar mexico trading at the lowest level of the session. Investors thinking this is a positive, the fact that these talks are continuing, at least mexico is still in the game. I want to go back to the mexican perspective. It is always dangerous to get too many analogies. Thinking about brexit. Concern suppose that vote about is there any indication, are people getting concerned about that . The investment plans, we heard it a lot after the election, investment plans in mexico being delayed . That is always a possibility. The theme, the most difficult pill to swallow would be rules of origin in the automotive sector. That is where mexico is gaining all of its investment. It is the biggest engine of growth for many years. With some could deal of the other concessions on , even the cure meant sunset clause, when it comes to rules of origin that would be the line in the sand. It is by percent is too high. The u. S. Requirement of content would be difficult for the automakers to comply with. You to ourank Mexican Government and economy forrter, and David Scanlan our canadian coverage. We want to stay with this topic and bring in an economic perspective. This and theat threat President Trump is making about withdrawing, talk us through what we know in terms of how that would play out . Can hell do unilaterally make a decision about that . It is already having an impact there. Dance your question, we dont think so. Youe is something called know what happens when you have to have an autonomous talk with a lawyer, something is awry. What we think we have decided is he probably could not do this without congress. There is something called the congress clause which States Congress decides the rules of the road dealing with international trade. While trump could make threats, he probably couldnt actually do it without that approval. Tariffshat happens to in that case . Can the president add tariffs . Or does it have to be congress . Tariffs, theized standard ones, he cannot change those without congress. He cant just say we are pulling out of nafta and increasing these tariffs. Andan on specific goods countries for short times raise tariffs which could be problematic but not in the long term. Joe lets assume he gets the approval. What areas of the u. S. Economy would you look at to be the most likely hardest hit . Agriculture. Anywhere where the government is running a trade surplus. Ofthink that is a tariffs u. S. Exports. It would be about 7 . That is going to be bad for u. S. Farmers currently. Talking about and balanced trade. Our tradeo know relationship with every Prime Minister or Prime Minister who stands next to him. Is that a Structural Force or is there something with mexico or canada we could tweak under different data . There is probably an opportunity to increase trade. , theres ways to fix it without targeting. If you look at the transportation sector and you factor that out with the u. S. Mexico trade relations. The u. S. Is running a surplus. That accounts for the entire deficit. Scarlet that keeps coming up, auto parts and auto issues of origin. Is that mainly because of politics, that becomes a more divisive issue . Great sloganmerica applies to the manufacturing sector. That is at the heart of what got trump elected. Even if we were to take nafta, theut of capacity does not currently exist to make up for what is lost in mexico. His assumption is you would have billions of dollars in the capacity is back. In actuality what would happen is tariffs are not going to be that big. They will pass the costs to consumers and just keep producing in mexico. What the nextnow effect of stepping way for nafta would be . President trump cant unilaterally raise tariffs. That doesnt stop other countries raising tariffs and impacting the United States. What do we expect here . Good or bad . The net impact would be negative but it wouldnt be that substantial. Assuming you hold the tariffs . What about the fact they could raise tariffs . If they raise tariffs, that is not something they are going to do. That is going to be more disruptive. When you are doing trade negotiations if the trade the company by moore has the upper hand. Especially when it comes to mexico. You are already seeing the impact the uncertainty is having on investment. It has an impact in exports. They are actually rising. They dont want that shooter fall because it is a major driver of growth. Talkingre basically about a trade war. Scarlet it all comes down to the headlines of getting a win here. Thank you so much. Now, coming up, Chinas Communist PartyCongress Kicks off tonight. What effect would have on Economic Reforms . This is bloomberg. Scarlet president xi jinping opens the communist Party Congress with remarks tonight. Can we expect chinese policy toward north korea to shift . The author of the book chinas future. One would hope so. The Economic Reforms in the last four years have been stalled. Best isementation at the common consensus. That is the most important question. Will there be greater momentum and support for the economic reform package they announced . It depends on the appointment of the premier. That is the one appointment coming out of this that we do not know yet. The rest of the results are ready anticipated. If there is a strong premier appointed we can expect the Economic Reforms to pick up steam. I would expect five more years of stalled implementation. There was a belief they would not let the government slow too much. What happens after . It is not a question of economy to slow. Rates maintain the growth , it is an indication of a lack of implementation. Infrastructure driven kind of growth, that is not what china needs. China needs structural changes. When it comes to chinas relationship to the world, they have been averse to interfering with other states. Will they do more to rein in north korea . That assumption that china is not interfering in other sovereign states is false. China routinely and regularly interferes. Right now they are interfering in south korea. China interferes a lot in other internal affairs. In terms of north korea we have seen them grudgingly go with the uns sanctions. To be trying to increase the implementation of those sanctions. They wants tommy President Trump was doing a good job handling north korea and china as well because he was unpredictable. Is this the right way to approach these states . No. Predictability is an asset in dealing with them, and consistency. The chinese dont know what to make of trump. Much of the world doesnt know. On monday he says one thing and on tuesday another thing. That is not good for sensitive issues such as north korea. The chinese and other Asian Countries he will visit when he goes to the region are looking for reassurance, predictability and constancy. That was the professor at the George Washington university. Covererg television will xi jinping speech before the commonest Party Congress in beijing at 9 00 eastern time tonight. A look at the biggest business stories in the news now. According to the wall street journal, fighting foundation officials. Soros will not trade funds from open society. Push society to the top ranks of philanthropist organizations. Will boostdson shipments to dealers by 10 . It finds bike sales slumping across all regions. They were down in each region through the first nine months. The company is overhauling its ridershipincrease overseas. And the eight member ivy league fund through june the rewarded portfolios invested in public equities rather than private markets. 12. 6 erage return is according to data. The performance trailed the average among 450 endowments and foundations. That is your Bloomberg Business flash. The stock of the hour, another casualty of amazon , w. W. Grainger rallying after earnings fell less than estimated. Lets explain. Consumer thing. You talk about competition for groceries and apparel. It sells itself not to regular people but more to businesses. Amazon is in this business. Is also in the industrial space. The Company Earnings were down but that was not as large a drop as anticipated. It has been cutting prices in order to try to hold onto market shares. That strategy has been working to some extent. When you look at the reaction you see what the stock has done this day. Joe can you explain how amazon played in this . They sell the same kinds of things on the list . The reason amazon is this hadical, Brooke Sutherland a piece out today. These earnings are all well and good but amazon still presents more existential threats. And how far can price cutting go . It sounds like they mostly distribute rather than manufacture their own. We have the operating margin. Amazon, they have a certain amount of flexibility. As brooke pointed out, granger would need a 5 boost in sales volume to counteract one and a half Percentage Points from price cut. How far can you cut the prices here. Are they global or just United States . They are global. Amazon operates. Joe it is a bunch of different brands. It is all distributed. What portion are digital . They do have a digital component. Reasons that if you look at that chart there was another leg up on the Conference Call was going on. Talking about the digital marketing. Some level of traction. Scarlet that will be the challenge going on. Julia you were there with me. 23,000 the dow hitting for the first time ever. We have the chart you cant miss. This is bloomberg. Dontt the mexican peso move in sync but that is starting to change a little bit. It shows the spot price. The blue line is Canadian Dollar per u. S. Dollar. Can see bothr, you currencies have been losing ground to the u. S. Dollar. We saw the peso get a lift after the headline. We will have to push off the deadline while the loonie weekends. This shows the correlation. It is nowhere near a lockstep. Increaseeing a steady in correlation rising in the first four rounds to renegotiate nafta. They have been steadily rising ever so slightly. Joe and then it is nafta headlines driving folks. This is very important for Fund Managers to watch. Byy may be taken off side this rampant turndown over getting a deal. The white line is the exchange rate. That means the peso is getting stronger. The recent downturn over the last month, it reflects that skepticism. They are going to extend it but the rhetoric was far from good. The blue bar, you can see during went pretty people along thinking it still had room to run. There is still they are still pretty long even as the peso has come down. It will be interesting to see , if there is more of a squeeze, if they will see a rapid unwind. Watch this space on those talks. It would be what if you didnt see the dow jones ending hitting 23,000. We can give you all sorts of reasons about why this is or isnt an important level. As exciting as it is, the question is, do we continue to rally . Scarlet i suspect we will see modest gains. There you go. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Julia whatd you miss . Stocks continued to entire, the dow topping the 23,000 level for the first time. On dollar also rallying speculation the next fed chair will be more hawkish. I am julia chatterley. Scarlet i am scarlet fu. Joe i am joe weisenthal. If you are tuning in live on twitter, we want to welcome you to our closing bell coverage. Scarlet we begin with our market minutes. The Dow Jones Industrial average did top 23,000 earlier in trading today but could not get past the hurdle by the close. At least not in the initial first minutes. The s p approaching around a number, if you think 2560 is a number. Were talking another melt up. Nasdaq, little changed. Plenty of news to go on, including earnings. Lets start with political developments. They have reached an agreement on a bipartisan deal on subsidies for those insurance companies. As a result you are seeing gains in the health care extension, both of which have exposure to the obamacare exchanges. United Health Rising for separate reasons. They raised the guidance to 10 a share after beating estimates. Had top johnson estimates. Two banks, Morgan Stanley gained as much as a percent. Rdquarter earnings beat the part of the business where he has been putting emphasis. 2. 6 ,n sachs down by after citing a decline in its Investment Banking transaction backlog. Mostly toppedlts analyst estimates. Joe lets take a quick look at government bonds, the u. S. Twoyear and 10 year. Twoyear yields up to 1. 55 . 10 year yield unchanged at 2. 3 . Julia just giving you a look at canada and mexico, in a similar vein to what scarlet was talking about the Canadian Dollar spots and the mexican peso spot, the blue line. There was weakness, the dollar higher in these currencies. This is a session chart. You can see we got the press conference around 2 00 p. M. In thelly to selloff, mexican peso and Canadian Dollar. My argument is, despite concerns the talks are going badly, they have been pushed back. But they are still going. There is going to be a fifth round of talks. They were having a weaker session earlier on, as you can see. That is the dollar, stronger, the story of the session. Broader weakness going on in em. The turkish lira, lower, the african rand, and the ruble, too. Joe on commodities, oil hitting 52 a barrel. West texas intermediate, ongoing concerns about supply in iraq, but it is not much going on. It has been in this range for a while. Gold ticking lower. Copper had a big day yesterday, but Industrial Metals selling. Copper down over 1 . Zinc futures down over 3 . Chinasreaking news on u. S. Treasury holdings, they have risen to the highest level since july 2016. 11. 5 billion of u. S. Treasuries 5. 45 billionling in equities in august. Here is a great chart. We did see that depth off from the beginning of 2016, beginning of 2017. A pullback adding to that. Those are todays market minutes. Did we say that already . Waiting for ibms earnings. We are joined by a Senior Analyst of Software Services for bloomberg intelligence. When we look at ibm everyone is focused on the cloud, watson, and artificial intelligence. This is where ibm is really putting its eggs in the basket. They are legacy products people are going toward a lot of these emerging i. T. Products, such as Cloud Analytics security. That is where the bulk of the spending is going. Ibm is also doing that. Scarlet how does the growth rate look . I know in the Second Quarter it was 7 . But then it was faster than that. That suggests moderation. Anurag the 7 was almost all organic. All in all, it is in the same range. Julia what proportion of its revenues is it . Anurag about 43 or so. Is entire Company Revenue down 2 or 3 , imagine how much the rest is declining by. That is a big store you have to figure out. Has. Not done particularly well the stock has not done particularly well. It is now at 146. As if ibm isook doing anything impressive on these fronts. What do they have to show . What is the bar for success right now . Anurag organic Revenue Growth and gross market improvement. Those about two metrics you want to measure i. T. Services companies by. Julia it was across the board, wasnt it . And it is going in the wrong direction, not the right way . Anurag a lot of legacy products you see pricing pressure, shifting budgets. A lot of that has an impact on pricing, which gets reflected. In lso had m a investment for cloud. Julia analysts are expecting further erosion. What are you expecting erosion are stabilizing . Anurag it should stabilize going into the Fourth Quarter, they have a mainframe refresh cycle.