Trump’s path to a new NAFTA deal runs through Canada, lawmakers say

4 takeaways from the U.S.-Mexico trade deal

The United States and Mexico have reached an "understanding" on several critical trade issues following bilateral talks to renegotiate the North American Free Trade Agreement.

As Trump blithely repeated his threat to dump Canada, Mexican President Enrique Pena Nieto repeatedly stressed - four times his disembodied voice permeated the Oval Office via speaker phone - that bringing Canada into the deal was the next move.

When the reality show spectacle of Trump's Oval Office phone call with Pena Nieto had subsided, senior USA officials briefed journalists on a conference call. "And now it's a really good deal for both countries, and we look very much forward to it".

Monday's news of the U.S. -Mexico agreement on trade pushed the S&P 500 and Nasdaq indexes to record highs, and indexes across Europe and Asia followed Wall Street's lead, inching to multi-month highs.

Speaking from the White House Monday morning, President Trump announced a reboot of NAFTA after weeks of negotiations with Mexico.

Senior administration officials also made clear on a call with reporters Monday afternoon that they were still pursuing a revised NAFTA trade agreement, though they maintained the possibility of a bilateral deal between the United States and Mexico if a trilateral deal with Canada can not be reached.

Lighthizer said the administration would notify Congress by Friday of the new agreement, which would allow the required 90 days' notice to get the pact signed by December 1. Before the original free trade agreement in 1987, Canada walked away from the table on it. Companies don't like U.S. courts because they can be politicized. Both U.S. and Mexican officials said Monday they are now focused on Canada.

The stock market rallied sharply after the partial deal was announced, with many investors believing it offered a first sign that Trump was shifting away from the protectionist trade approach he had adopted since earlier this year. But the agreement itself will mean little without Canada or congressional approval.

"We could have a separate deal (with Canada) or we could put it into this deal", Trump said. At one point, Trump mused that simply imposing punishing tariffs on Canadian cars would be easier.

Trump and Pena Nieto have also agreed that 40 to 45 per cent of each auto manufactured must be build by workers earning more than $16 an hour. It has a bad connotation because the United States was hurt very badly by NAFTA for many years.

"I told him it was important that (Canada) rejoin the process, with the goal of concluding trilateral negotiations this week".

Canada's auto plants stand to benefit from rules requiring up to 45 per cent of vehicle content from factories where workers earn at least US$16 per hour. "When I'm in Congress, I will fight for truly free and fair trade deals and not just let my party leadership do the talking".

"Mexico made a quantum shift from where they were thanks, I think, to their new president who argued that NAFTA was awful for Mexican workers who got the jobs but not the pay", he said.

But experts remain skeptical, especially given Canada's absence in the latest round of negotiations, and some are questioning the legality of the bilateral deal.

Canadian Foreign Minister Chrystia Freeland is headed to Washington on Tuesday to restart talks to replace the three-way NAFTA pact.

A major part of the agreement surrounds import taxes on cars.

But some industry groups said they wanted more clarity on final terms before celebrating the deal.

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