US, Mexico reach NAFTA deal as attention turns to Canada

Donald Trump announces new trade deal with Mexico

Freeland cut a trip to Europe short to travel to Washington after President Donald Trump announced Monday that the us and Mexico had reached a bilateral trade "understanding" that could lead to an overhaul - or perhaps the termination - of the three-country agreement.

"Mexico made a quantum shift from where they were thanks, I think, to their new president who argued that NAFTA was bad for Mexican workers who got the jobs but not the pay", he said. It later morphed into the US-Mexico deal's requirement of 40 to 45 per cent of a vehicle's value to be made in high wage areas paying at least $16 an hour, requiring significant automotive production in the United States.

Canada's top trade negotiator joins her Mexican and USA counterparts in Washington on Tuesday in a bid to remain part of a trilateral North American trade pact, as US officials expressed optimism a deal could be reached this week.

The Canadian foreign minister, Chrystia Freeland, cutting short a trip to Europe, was due in Washington on Tuesdayto start talks with United States trade negotiators, as pressure mounts on Ottawa to agree to join the agreement.

But Freeland also said, "We will only sign a new NAFTA that is good for Canada and good for the middle class". The president is hinting at possible retaliation against Canada's auto industry if a deal can't be reached, although he says they'll start negotiating with Canada soon.

But Canada is likely to object to revisions in Nafta that include rules that will make it harder for treaty members to challenge United States trade penalties.

Lighthizer said the administration would notify Congress by Friday of the new agreement, which would allow the required 90 days' notice to get the pact signed by December 1. He labeled NAFTA "seriously out of whack" in a way that "led to large trade deficits" and said it needed updating.

That could be big news for US property developers.

"If they want Canada to ditch [dairy] supply management, I don't see how the Liberals could sell that to Canadians in an election year", he said. "A lot of people thought we'd never get here, because we all negotiate tough", Trump said as he walked into the Oval Office and took his seat behind the Resolute Desk.

Mnuchin also indicated that the US would go ahead with the US-Mexico deal with or without Canadian support. "That provision will not exist", he said Monday, but it was historically a dealbreaker for Canada.

Automobile stocks soared and financial markets firmed on the expectation that Canada would sign on to the deal by the end of the week and ease the economic uncertainty caused by Mr Trump's repeated threats that he would ditch the 1994 accord.

Trump says he will be calling Prime Minister Justin Trudeau.

"It's an incredible deal for both parties", Mr Trump said.

The United States Trade Representative said only that they've reached a "preliminary agreement in principle, subject to finalization and implementation".

"(It) is definitely good news for Mexico and the U.S., but could be good or very bad for Canada", Capital Economics Chief U.S. Economist Paul Ashworth wrote in a note to clients on Monday afternoon.

A major part of the agreement surrounds import taxes on cars.

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

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