US, Mexico reach trade "understanding", Trump threatens to cut out Canada

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If not, Trump will advance the deal with Mexico and leave Canada behind.

"This could just be the initial tough negotiating posture, but it does signal that the Americans are intending to take a tough line with Canada".

Canada, which is part of NAFTA, did not participating in the announcement.

That provision would have allowed US produce suppliers to make a claim of anti-dumping against Mexican producers when it shipped large amounts of produce into the U.S.at certain times of the year. "The easiest thing we can do is to tariff their cars coming in". It would also require 40 percent to 45 percent of auto content to be made by workers earning at least $16 per hour, a second official said.

Canada has been absent from the NAFTA bargaining table since trilateral talks paused last spring. "I think this is threat and bombast, but it is indicative of a very negative relationship between the White House and the Canadian government", Herman said. Among the controversial issues to be discussed with Ottawa is a "sunset clause" that Trump wanted, and which would impose a review of the deal every five years.

President Donald Trump made the announcement on Monday from the White House. American negotiators know what Canada has already done on dairy in past trade deals: it gave the European countries greater access to the protected market in the Canada-EU trade deal, and it was willing to the do the same in the Trans-Pacific Partnership.

"I think we're at a position where we're going to have discussions with Canada this week and see where we get to", the official said, referring reporters to Mexico to describe their position. This new deal will limit Mexico's ability to take USA manufacturing jobs by underpaying workers.

President Trump is the most powerful person in the world.

Major currencies gained against the USA dollar, which has been a safe haven from months of trade tensions. While the country posted its best month of worldwide trade ever in June - with a record level of exports headed south of the border - a significant hit to the trade file could jeopardize that performance, Shenfeld cautioned. "We've gone through all this with steel and aluminum, but the auto industry is a lot bigger".

The deal maintains tariff-free trade for farm products, but with new measures on labelling and health standards.

First, though Trump declared NAFTA dead, only Congress can actually undo the legislation that created the three-way trade bloc in 1994.

South of the boarder, the reaction was more subdued as the office of Mexican President Enrique Peña Nieto released a statement saying the two nations have "reached an understanding on the main issues of importance for both countries". Congress will have 90 days before voting.

Ford, GM, and Fiat Chrysler - the US's largest automakers - all got a boost Monday following the announcement that the U.S. and Mexico reached an agreement on parts of NAFTA.

Republican lawmaker Kevin Brady, chairman of the tax and trade-focused Ways and Means Committee, called on Canada to return to talks quickly "with the aim of concluding a modern, seamless three-way agreement". However, the president affirmed negotiations with Canada will begin "very shortly". "We have expressed our misgivings to the association but where it will end up we don't know", said Hershie Schachter.

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