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U.S., Mexico reach trade 'understanding,' door opens for Canada

27 August, 2018, 22:29 | Author: Shawna Walton
  • 'Very important' NAFTA issue remains as reports say U.S.-Mexico near deal

The United States has reached a trade deal with Mexico on Monday while Canada remains on the sidelines of the North American trade talks.

Once a U.S. -Mexico agreement is reached, Canada is expected to rejoin the negotiation.

Trump said the deal will be called the United States-Mexico trade agreement, terminating the 24-year-old NAFTA deal.

Advisers of incoming President Lopez Obrador hailed the new deal, saying it represented progress on energy and wages for Mexico's workers.

Freeland's spokesman Adam Austen said, "We will only sign a new NAFTA that is good for Canada and good for the middle class".

There is one difference left to iron out, Mexican Economy Minister Ildefonso Guajardo told reporters early on Monday as he entered the Washington office of the U.S. Trade Representative's office where negotiations are going on. The president said, "we'll see" if Canada can be a part of the deal, or if it will be a part of a separate deal.

Rather, it would be a sub-deal that will now be folded into the ongoing three-country talks over the future of NAFTA. He called the agreement "a really good deal for both countries", and added that negotiations with Canada will start soon, or additional tariffs on Canadian imports will be applied.

"Even Trump efforts in trying to find bilateral deals with everyone, has pushed USA shares to new records and will support markets", said Angelo Meda, head of equities and a portfolio manager at Banor SIM in Italy. By definition, we buy more from them than they buy from us, which gives us the power any major consumer has over a seller. For that to happen, the US Congress must be notified 90 days in advance.

Mr Trump has not yet begun negotiating with Canada, but has called on Prime Minister Justin Trudeau to lead negotiations "fairly".

The Trump administration said the deal improves labor provisions.

In May, the United States imposed steep tariffs on steel and aluminum from much of the world, including Mexico.

Austen said Canada remains "in regular contact" with the USA and Mexico on NAFTA-related issues and will "only sign a new NAFTA that is good for Canada and good for the middle class". If not, Trump will advance the deal with Mexico and leave Canada behind.

"The (NAFTA) talks add to the sense that while the U.S.is still bogged down in its trade conflict with China, it is perhaps more willing to compromise elsewhere such as with Mexico and the European Union", said Ulrich Leuchtmann, head of FX and emerging market research at Commerzbank in Frankfurt.

CIBC Capital Markets chief economist Avery Shenfeld said that any offer the USA now makes to Canada will be to "take it or leave it".

Auto-immunity: Per Reuters, the agreement helps resolve one of the stickiest issues that arose under NAFTA surrounding the rules of origins for cars, which required that a certain percentage of vehicle parts be from countries within the NAFTA region in order to avoid tariffs. The announcement of a U.S. -Mexico agreement lifted financial markets.

On cars, the two sides also settled on rules that will require 40-45 percent of each vehicle to be made by workers earning at least $US16 an hour.

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