Trump Announces New U.S.-Mexico Trade Agreement

U.S. President Donald Trump shakes hands with Mexico's President Enrique Pena Nieto during the their bilateral meeting at the G20 summit in Hamburg Germany

Canada's NAFTA negotiator, Foreign Minister Chrystia Freeland, is cutting short a trip to Europe to fly to Washington Tuesday to try to restart talks.

The United States and Mexico agreed on Monday (Aug 27) to overhaul the North American Free Trade Agreement (Nafta), putting pressure on Canada to agree to the new terms on auto trade and other issues to remain part of the three-nation pact.

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

President Donald Trump had previously threatened new tariffs on Canadian vehicles if no agreement was reached.

Freeland is under increasing domestic pressure not to compromise.

But Prime Minister Justin Trudeau has insisted his government will only sign a deal that's good for Canada. That is not the same thing as signing a new bilateral deal. Both Canada and Mexico, as well as many in the USA business community, reject that idea.

And there are political reasons to keep Canada inside the regional bloc: "Mexico will have a hard time selling "Trump's deal" back home if Canada does not think it is a good deal", said Daniel Ujczo, a trade attorney with Dickinson Wright PLLC. Currently, about 62% of parts are required to be produced in the United States, Mexico or Canada.

The provision is created to discourage carmakers to move jobs to lower-wage Mexico.

"We're glad to see Mr. Trump step back from the suicide of Nafta withdrawal, but on the public evidence so far his new deal is worse".

"We are now going to devote long hours to the negotiation with Canada", he said.

If U.S. President Donald Trump becomes "hostile" against Canada as the country seeks a trade deal with its North American counterparts, the economies on both sides of the border would suffer, according to Bruce Heyman, the former U.S. ambassador to Canada.

But a deal without Canada could be harder than he thinks, experts say.

The draft deal reached by the United States and Mexico boosted American stocks to record highs on Monday. Now, the USA could use its new tariffs on lumber as a negotiating tool to provide leverage in that dispute. But it is unclear whether the president has the legal authority to do so without congressional approval, and his lead trade negotiator later said the United States would not withdraw.

President Trump signaled a deal was close at the end of last week and did so again before the announcement Monday morning.

He said Trump also aims to make trade deals with other countries, including Japan and the European Union, which puts China on the defensive.

The Business Roundtable raised concerns about proposals to require a sunset provision, weaken investment protections and limit access to dispute settlement procedures.

Well Mark... the update announced on Monday focused mainly on the automotive industry.

"NAFTA was a tri-party agreement only made operative with legislation enacted by Congress", said Toomey, a member of the committee that oversees trade policy.

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