President Trump Announces New Trade Deal with Mexico

President Trump made headlines Monday when he announced his plan to “terminate” NAFTA, as trade talks with Mexico yielded a preliminary agreement.

Calling it a “big day for trade,” Trump announced the agreement to reporters in the Oval Office on Monday, during an open phone call with Mexican President Enrique Peña Nieto.

The agreement is mostly focused on changes to current trade laws pertaining to manufacturing, particularly where parts used in the construction of automobiles should be produced.

Under the current law, about 62% of the parts in any car sold in North America must be produced in the region or automakers have to pay import taxes. The new preliminary agreement would require that 75% of auto parts be made in the United States and Mexico, according to the US Trade Representative’s office.

CNN

President Trump said the agreement was “a really good deal for both countries” and that he would drop the name NAFTA because it “has a lot of bad connotations for the United States because it was a rip-off.”

Instead, the President said, the new agreement would be known as the “United States-Mexico Trade Agreement.” The nation of Canada is conspicuously absent from that moniker, although President Peña Nieto repeatedly mentioned that he would like for Canada to be involved. Trump signaled openness to Canada being part of the new agreement, though he also suggested that a separate deal with Canada was also possible.

The deal’s announcement was likely designed to apply pressure to Canada, The Washington Post explained. Canadian Foreign Minister Chrystia Freeland is scheduled to arrive in Washington Monday night or Tuesday morning, according to the Post, as Canada plans to rejoin trade talks following bilateral resolutions between Mexico and the United States.

An effort to pressure Canada would align with President Trump’s statements from earlier in August threatening that he would impose tariffs on its automobiles if negotiations fell through.

President Trump also told reporters following an October 2017 meeting with Canadian Prime Minister Justin Trudeau that “I’ve been opposed to NAFTA for a long time in terms of the fairness of NAFTA. I said we’ll renegotiate. I think Justin understands this, if we can’t make a deal it’ll be terminated and it will be fine.”

As The News Blender covered in May, some of the delays in reaching an accord have arisen from the United States seeking a five-year sunset clause as part of the agreement, which would allow the deal to expire if not renegotiated every five years.  Mexico has thus far rejected that plan, but it is unknown as of Monday whether or not the Trump administration still hopes to include it as a part of final negotiations.

Per The Washington Post’s report, Republican congressional leaders have expressed optimism towards the progress in talks, but cautioned that they would only support a final agreement if Canada was involved. Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) made it clear that “A final agreement should include Canada,” while No. 2 Senate Republican John Cornyn (R-Tex.) stressed that “This is a positive step, and now we need to ensure the final agreement brings Canada in to the fold and has bipartisan support.”

CNN’s coverage of the announcement can be viewed below.

Why It Matters

Mexico’s president-elect Andrés Manuel López Obrador is a populist-nationalist and, although he has evinced an interest in maintaining any cooperative free trade agreements in place with the United States, the future of any agreement reached after he takes office on December 1 remains dubious. And under the rules governing the President’s powers to negotiate trade terms, any agreement reached must be presented to Congress 90 days before taking effect. That leaves five days for the United States to wrap up talks with Mexico and reach an agreement with Canada.

Hopefully, President Trump will refrain from doing or saying anything to jeopardize arrangements during final talks. The future of North American trade depends upon it.