United States – Mexico Trade Agreement

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United States – Mexico Trade Agreement

The United States and Mexico agreed Monday to a revision of portions of the North American Free Trade Agreement (NAFTA) after a year of negotiations.  President Trump announced that the countries would be entering into a new trade deal called the United States-Mexico trade agreement.  The President claimed the NAFTA name  “has a bad connotation.”

President Trump said he will terminate NAFTA and sign a new bi-lateral trade agreement with Mexico.  It is expected that this will increase pressure on Canada to accept new and more favorable terms for the U.S. to avoid repercussions should NAFTA be terminated.

The three nations would need to sign a deal by September 1st in order for Mexican President Enrique Peña Nieto to sign it before he leaves office in November.  It remains unclear when the agreement will be finalized.  Canada has not been involved in negotiations for over two months.

Details of the agreement have yet to be finalized but those who have been following the negotiations identified a few changes.  There were a number changes in the agreement to reflect the internet and digital economy.  Auto makes that don’t abide by NAFTA rules (formerly requiring 62.5% of North American manufacture but increased to 75% under the new deal with Mexico) will pay a 2.5% tariff.  The sunset clause, which the U.S. demanded to be five years, is said to have been softened.  Another key issue, the Chapter 19 anti-dumping panels the U.S. wanted eliminated but which Canada refused to agree to, remains undetermined.

On Monday, Mr. Nieto said that he had spoken to Justin Trudeau, the Canadian Prime Minister, and was working towards a three-way agreement by the end of the week.  The potential of a two-way deal between Mexico and the U.S. seems unlikely because of the opposition from American lawmakers, Mexico, and industries whose supply chains rely on all three countries.  Officials are hopeful that the progress between the U.S. and Mexico will bring Canada back to the table.

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