U.S. And Mexico Reach Trade Deal; Trump Wants To Drop NAFTA Name

By John Ydstie

Published August 27, 2018 at 12:54 PM EDT

Last year, the Trump administration unveiled its goals for renegotiating the North American Free Trade Agreement, a deal that reshaped trade between Canada, Mexico and the United States.

Updated at 5:40 p.m. ET

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. They will now likely re-engage with Canada to reach a final deal on NAFTA, a primary goal of the Trump administration.

Speaking at the White House on Monday, President Trump said he wanted to change the NAFTA name to the U.S. Mexico Free Trade Agreement. He also reframed the negotiations as two bilateral trade deals.

"We've made a deal with Mexico, and we'll get started with Canada immediately," Trump said. He also said he would "be terminating the existing [NAFTA] deal very soon" because NAFTA has "a lot of bad connotations" and has been a "bad deal" for the United States.

The breakthrough between the U.S. and Mexico involved an agreement on the amount of North American content a vehicle must have in order to pass duty-free across borders. The percentage was moved up to 75 percent from its current level of 62.5 percent. Negotiators also agreed to increase the percentage of vehicles built in factories paying an average wage of at least $16 an hour.

U.S. automakers have opposed raising the North American content requirement, but the United Auto Workers union has supported it.

The third NAFTA partner, Canada, has not been at the negotiating table for many weeks. It will now presumably re-engage.

Prior to Trump's remarks, Canadian Foreign Minister Chrystia Freeland said through a spokesman that "Canada is encouraged by the continued optimism shown by our negotiating partners. Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement."

But Freeland also said, "We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada's signature is required."

The three nations had hoped to wind up negotiations by the end of this week.

U.S. law requires a three-month waiting period after a deal is completed before Congress can ratify it. Mexico will swear in its incoming president, Andrés Manuel López Obrador, on Dec. 1. If a NAFTA deal isn't signed before then, López Obrador could demand changes — and a deal that took years to negotiate could unravel. But Trump and U.S. Trade Representative Robert Lighthizer said Monday that they plan to send a Mexico-U.S. deal to Congress by Friday to start the clock on the waiting period.

It's not clear Congress would accept a deal without Canadian participation. President Trump suggested he could pressure Canada to sign the deal by placing import tariffs on Canadian automobiles.

The deal does not include the sunset clause Trump had proposed, which would have ended the new agreement after five years, unless all countries explicitly agreed to extend it. Instead, the trade treaty is set for 16-year terms, with a six-year review that could recommend changes to the treaty.