Preliminary Agreement Between the U.S. and Mexico on Revising and Changing NAFTA

On Monday, the United States and Mexico reached an agreement regarding the revision and changes to the North American Free Trade Agreement (NAFTA), thereby putting pressure on Canada to agree to terms related to automotive trade and other issues to remain in the pact. According to Reuters, U.S. President Donald Trump and Mexican President Enrique Peña Nieto stated that negotiations with Canada would begin soon, although Trump threatened to impose tariffs on Canadian-made cars if a trilateral agreement is not reached. Trump said, "I think the easiest thing we can do regarding Canada is to impose tariffs on cars imported from that country. It's a lot of money and very simple negotiations. It can be done in one day, and the next day we will have a lot of money." Negotiations among the three countries have lasted over a year, during which Trump's repeated threats to terminate the agreement, signed in 1994, have unsettled financial markets and led to a decline in the value of the currencies of Mexico and Canada. The discussions between Mexico and the U.S. focused on automotive industry regulations, which Trump considers the most crucial aspect of revising an agreement he has described as a "disaster" for American workers. A spokesperson for the Canadian Foreign Minister stated that Canada would continue negotiations but would only sign a new deal if it is beneficial for Canada. The trade volume among the three countries exceeds one trillion dollars annually. Following the announcement of the U.S.-Mexico agreement, stock values in financial markets increased. Trump indicated that he would soon speak with the Canadian Prime Minister. A U.S. Commerce Department official expressed hope that a final trilateral agreement could be reached by Friday. Reuters adds that Justin Trudeau, the Canadian Prime Minister, spoke with the Mexican President on Sunday, and according to the Canadian Prime Minister's Office, both sides emphasized a final agreement on NAFTA that would be "beneficial for all three countries." A U.S. Commerce Department official stated that under the new agreement, 75% of the parts used in the automotive industry must be produced in one of the three member countries of the agreement, up from the current 62.5%. Additionally, 40 to 45% of the parts must be produced by workers earning at least $16 per hour. A senior U.S. Commerce Department official told Reuters, "We are now inviting Canada to join us and hope we can reach a successful agreement with that country as well. There are still issues regarding Canada, but they can be resolved quickly." According to U.S. officials, Trump is expected to formally notify Congress of the new agreement within the next 90 days by the end of this week, allowing Peña Nieto, whose presidency will end in the coming months, to sign the agreement before that date.