Trump Announces New U.S.-Mexico Trade Agreement

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Ultimately, Canada may accept the deal but there's clearly a strategy here to isolate the Canada and it's one that caught them by surprise.

"It's a tremendous amount of money and it's a very simple negotiation".

Negotiations between the three trade partners have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar.

"The deal announced Monday has moving parts and there is still time to make improvements before it is signed and sent to Congress", the Journal's editorial board wrote.

Canadian Minister of Foreign Affairs, Chrystia Freeland gives a message to the media during the seventh round of NAFTA talks in Mexico City, on March 5, 2018. Last year, the United States of America had a large $71 billion trade in goods deficit with Mexico, owing in part to much lower worker pay. They then would either agree to a new 16-year deal or the pact would expire.

"We made it much simpler", Trump said in the Oval Office announcement, surrounded by Guajardo, Mexico's Foreign Minister Luis Videgaray and US Trade Representative Robert Lighthizer.

More broadly, the deal vindicates Trump's approach to trade, which has been lambasted by voices ranging from Wall Street to the national security establishment to the Chamber of Commerce, as well as mavens from both political parties. "That said, it does seem like there are still a few hurdles to clear first, and in particular the deal's path through Congress".

"I told him it was important that (Canada) rejoin the process, with the goal of concluding trilateral negotiations this week".

A final deal would need sign-off from Canada, the third country in the treaty, which governs more than $US1 trillion ($NZ1.49t) in annual trade. Her boss, Prime Minister Justin Trudeau, even though it was a good idea to antagonize Trump at his failed G7 summit in June. He also suggested he might drop the name NAFTA altogether, offering instead a new title that conspicuously removes Canada from the picture: the "United States Mexico Trade Agreement". All of this is on a very tight timetable, economists and observers said.

The upbeat trade outlook was further boosted by news that Washington was pressuring the European Union to accelerate tariff talks.

Under the deal, the amount of NAFTA-made content required for vehicles to qualify as tariff-free rises from the current 62.5 per cent to 75 per cent.

The US-Mexico agreement has tougher new protections for collective bargaining, and requires 40 percent of autos receiving duty-free treatment to come from factories where workers make at least US$16 an hour.

Negotiators have worked for a year to update and rewrite NAFTA, but in the last five weeks Washington and Mexico City worked to resolve their bilateral issues without Ottawa.

Establish that 40% to 45% of a auto or truck's content must be made by workers earning more than $16 an hour.

That measure could move some production back to the United States from Mexico and should lift Mexican wages, the White House official said. Many manufacturers have built complex but vital supply chains that cross all three NAFTA borders.

Some Japanese automakers could face a similar challenge, but their responses on Tuesday were mostly positive. "I think with Canada the easiest things we can do is tariff their cars coming in", Trump insisted. "They know the issues, we talked about all these issues" during previous rounds of talks.

Nissan said it was "encouraged that an agreement was reached, and hope that it appropriately considers the impact on our employees, suppliers and customers".

But perhaps the biggest issue has been the United States demand for a sunset clause, which would mean reevaluating the deal every five or six years with the option to get out.