Trump announces new U.S. trade deal with Mexico

Muriel Colon
August 27, 2018

The analysis preceded the announcement by U.S. President Donald Trump on Monday that a deal with Mexico has been reached, opening the door for Canada to rejoin negotiations that have dragged on for more than a year.

"We'll get rid of the name NAFTA", Trump said.

The US and Mexico have reached common ground on key trade terms as pressure mounts to complete renegotiation of the North American Free Trade Agreement.

In a tweet, Mexican President Enrique Peña Nieto said he called Canadian Prime Minister Justin Trudeau shortly after the news broke, asking his team to return to the negotiating table promptly so a trilateral NAFTA deal could be finalized by the end of this week. Trump says negotiations with Canada have yet to begin and is calling on the country to negotiate fairly.

Stocks have rallied after the U.S. and Mexico have reached an agreement on a new deal to replace NAFTA, with the NASDAQ reaching 8,000 for the first time.

The White House is also expected to formally notify Congress by the end of this week of its intention to sign a new trade agreement within 90 days.

The last stipulation helps the USA and Canada, where wages tend to be higher, and fixes a long time gripe of those who opposed NAFTA, by reducing the incentive for auto manufacturers to move factories to Mexico where workers can be paid lower wages than is legal in the US and Canada. Instead of requiring the deal to be renegotiated every five years, a widely panned idea, the agreement will last for 16 years and can be renewed.

The deal with Mexico involves the automobile industry, but does not include other areas of contention, The New York Times reported.

A spokesman for Canadian Foreign Minister Chrystia Freeland issued a statement on Monday that warned against jumping to conclusions.

"I think with Canada, frankly, the easiest thing we can do is to tariff their cars", Trump told the assembled press in the Oval Office on Monday.

"Mr. President, you've been my friend, and you have been somebody that's been very special in a lot of ways, we talked a lot, we talked a lot about this deal, and I'd like to congratulate you and the Mexican people", said President Trump to President Nieto. Rather, it would be a sub-deal that will now be folded into the ongoing three-country talks over the future of NAFTA. Currently, about 62% of parts are required to be produced in the United States, Mexico or Canada.

But at least initially, it looks like at least a tentative public-relations victory for Trump, the week after his former campaign manager was convicted on financial crimes and his former personal attorney implicated him in hush money payments to two women who say they had affairs with Trump. But Trump has called the agreement "the worst deal maybe ever signed" and moved ahead with tariffs earlier this year.

Markets are also happy about Monday's announcement because nothing is changing anytime soon.

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