Preliminary U.S.-Mexico trade deal leaves trail of uncertainty

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Mexican President Enrique Peña Nieto was on speakerphone and says he hopes NAFTA partner Canada will eventually be incorporated into the deal.

Jerry Dias, national president of Unifor, tells BNN Bloomberg why the trade deal reached by the USA and Mexico is a good start for Canada's auto industry. Promising that Canada would "continue to work toward a modernized NAFTA", a spokesman for the Canadian foreign minister said that, "We will only sign a new NAFTA that is good for Canada and good for the middle class". It has a bad connotation because the United States was hurt very badly by NAFTA for many years.

On the US side, also participating in the call were US Trade Representative Robert Lighthizer and Trump's adviser and son-in-law Jared Kushner.

"It will be necessary for Canada to rejoin the negotiations and for an agreement to be reached among all parties before a judgement can be made".

In a statement, Trump said "America has ... finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our Nation's wealth".

He added that he hoped Canada would be able to soon join the agreement. And he thinks this will put pressure on Canada to get a deal. This agreement would merely revise NAFTA, but it's still a win for a get-tough approach that has rattled some USA manufacturers. Canadian Foreign Minister Chrystia Freeland said early Monday that Canada must sign off on any new three-way trade agreement, and she cautioned that it would only sign a new agreement that was good for her country. Asked about whether Mexico would be willing to sign a deal without Canada, a senior Administration official demurred, offering arguments for why the country might want to without saying that it would.

Prof. Leblond said it would be political suicide for Trudeau's Liberal administration, with one year before a general election, to give in to US demands for significantly greater access to Canada's protected dairy market.

"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.

NAFTA reduced most trade barriers between the three countries. The White House told Congress a year ago that it would renegotiate NAFTA, but never said it would start talks on an entirely new deal.

A 25 per cent tariff on autos would subtract as much as 1 per cent from Canada's GDP and could prompt a significant decline in the Canadian dollar, Shenfeld said.

While clearly stoked to get on live TV and announce that he and Peña Nieto renegotiated NAFTA, Trump's momentum was undercut by the awkward dead air the press corp and the entire home viewing audience endured when he tried to hold an impromptu joint summit over the phone.

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 Administration says it will proceed with the new deal regardless of what happens with Canada, but that promise could run up against several roadblocks.

Those elements - which line up with what was proposed at the NAFTA bargaining table in May - are "workable", said Flavio Volpe, president of the Automotive Parts Manufacturers' Association. Moreover, the USA might first have to drop its higher tariffs on steel and aluminum imposed on Canada and Mexico earlier this year.

"This wasn't created to put pressure on anybody", a senior administration official said, before later adding that the U.S. planned to submit its NAFTA renegotiation plans to Congress by the end of the week with or without Canada's agreement.

Asian investors extended a rally on Tuesday, tracking another Wall Street record as investors cheered a fresh trade deal between the United States and Mexico that brings an end to one row picked by Donald Trump that had rattled global markets.