Trump announces agreement with Mexico on NAFTA overhaul

by Jordan Fabian and Vicki Needham - 08/27/18 11:33 AM ET

President Trump said Monday the U.S. has reached an agreement with Mexico amid contentious talks on revamping the North American Free Trade Agreement (NAFTA).

Trump declared the name “NAFTA” would be scrapped for an updated North American agreement, saying it has “bad connotations.”

“It’s a big day for trade. It’s a big day for our country,” the president told reporters in the Oval Office, who were summoned to watch Trump speak by phone with outgoing Mexican President Enrique Peña Nieto.

{mosads}Trump cast doubt on whether Canada would be party to a new trade agreement, ramping up pressure on the country to agree to new terms to remain a part of the pact.

“We will see whether or not we decide to put up Canada or just do a separate deal with Canada, if they want to make the deal,” Trump said, adding that the two nations would begin talking “relatively soon.”

The president said he plans to “terminate” the existing NAFTA agreement and move forward with the new emerging deal with Mexico.

If Canada is excluded, it would mark a major shift in U.S. trade policy, which has been guided by NAFTA for the past quarter-century.

Trump would need Congress to approve the break-up of the three-nation agreement, a move that most on Capitol Hill would likely oppose.

A senior White House official said the administration plans to notify lawmakers of the U.S.-Mexico agreement, even if Canada is not yet on board.

“Ideally we’ll have the Canadians involved,” said the official. “If not, we will notify that we have a bilateral agreement and that Canada is welcome to join. We think that satisfies the requirements of the statute.”

Trump said he wants to call the new deal the “United States-Mexico Trade Agreement,” saying “I think’s it’s an elegant name.” Two key players who negotiated the pact were U.S. Trade Representative Robert Lighthizer and White House senior adviser Jared Kushner.

Peña Nieto told Trump that he looked forward to adding Canada to the deal. Canadian officials said they are interested in remaining a part of the agreement, but stressed the terms must good for their country.

Canadian Foreign Minister Chrystia Freeland is expected to travel to Washington on Tuesday for trade talks.

“We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required,” said Freeland spokesman Adam Austen said.

Sitting in the Oval Office, Lighthizer said the administration plans to notify Congress on Friday that an updated deal is complete.

That would start a 90-day clock, meaning the three nations would need to sign the new deal by the end of November.

The announcement marks the most significant development in the yearlong talks on overhauling NAFTA, which Trump has called a “disaster” and repeatedly threatened to exit.

The U.S.-Mexico deal would require 75 percent of auto content to be made in U.S. and Mexico, up from 62.5 percent, the Office of the U.S. Trade Representative announced.

The deal also would require that 40-45 percent of auto content be made by workers earning at least $16 per hour.

But negotiators face a number of key hurdles before completing a deal.

Canada has not participated in NAFTA talks since July as the U.S. and Mexico worked through their differences. Canadian negotiators would need to sign off in order to complete a NAFTA overhaul involving all three countries.

Trump said Canada could become part of the three-nation deal if they negotiate “fairly.”

One White House official expressed optimism that the deal will get a lot of bipartisan support because it’s the most “forward-leaning” on labor provisions.

One official said the announcement wasn’t designed to put pressure on Canada.

“The last several weeks we decided we were better off to get a deal with one party and then hopefully the other,” the official told reporters.

An official said there is an “alternative” to the U.S.-proposed five-year sunset clause, a suggestion that had held up an agreement.

There will be a 16-year period with a review after six years where the three countries would look at any problems with the deal that might need to be fixed. After that a new 16-year period would begin, one official explained.

“There are a lot of people who think we’re better off with all three countries involved and hopefully we will get to that result,” one official said.

Canadian officials say they are eager to begin talks with the United States and those discussions are expected to start immediately.

The president said he would talk later on Monday with Canadian Prime Minister Justin Trudeau.

But Trump, who has been critical of Ottawa’s negotiating tactics and high tariffs on some U.S. goods, said he would punish Canada with car tariffs if they play hardball on a final deal.

“With Canada, frankly, the easiest thing we could do is tariff their cars coming in,” Trump said.

“It’s a tremendous amount of money,” he said.

The announcement drew quick responses from lawmakers on Capitol Hill as well.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) urged the administration to include Canada in any final deal and ensure that it protects U.S. intellectual property as required under trade promotion authority to gain congressional support.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said he is looking “forward to carefully analyzing the details and consulting in the weeks ahead with my colleagues and constituents to determine whether the new proposal meets the trade priorities set out by Congress under Trade Promotion Authority.”

“I call on Canada to come back to the negotiating table quickly with the aim of concluding a modern, seamless three-way agreement,” Brady said in a statement.

Updated at 4:20 p.m.