Talks with Canadian officials expected after US-Mexico deal


U.S. president Donald Trump says he intends to terminate the North American Free Trade Agreement and call its replacement "the United States-Mexico Trade Agreement" - a name that would exclude the third NAFTA partner, Canada.

"I think we're at a position where we're going to have discussions with Canada this week and see where we get to", the official said, referring reporters to Mexico to describe their position.

The new agreement - pending the required signatures - could also change the proportion of a vehicle that must be made by workers who are paid $16 per hour or more.

The agreement tried to offset incentives to move production further offshore by requiring that 75 percent of auto contents have to be made in the United States, Mexico, or Canada-though Canada has yet to agree to terms with the United States on trade and negotiations remain ongoing.

"Canada is encouraged by the continued optimism shown by our negotiating partners", said a spokesperson for Canadian Minister of Foreign Affairs Chrystia Freeland.

"The United States was hurt very badly by NAFTA for many years", Trump said, adding that the pact with Mexico was "a really good deal".

In addition to sabre-rattling about tariffs that would punish Canada's auto sector, Trump once again took aim at another of his favourite targets - the country's heavily protected dairy industry.

But Canada is likely to object to revisions in Nafta that include rules that will make it harder for treaty members to challenge U.S. trade penalties.

Trudeau spoke to Pena Nieto on Sunday and shared their commitment to reaching a successful conclusion of NAFTA "for all three parties", the prime minister's office said. The president and other critics say the pact encouraged USA manufacturers to move south of the border to exploit low-wage Mexican labor.

"I desire, I wish that the part with Canada will be materializing in a very concrete fashion, and we can have an agreement the way we proposed it from the initiation of this renegotiating process, a tripartite", Peña-Nieto said through a translator. "If they'd like to negotiate fairly, we'll do that".

But critics of the deal suggest it has led to significant job losses within the U.S. market, with companies shifting operations to Mexico due to lower production costs.

The White House said Mr Trump will sign the deal in 90 days. The U.S. and Mexicans have agreed to raise North American content in cars and light trucks from 62.5 per cent at present to 75 per cent.

U.S. Treasury Secretary Steven Mnuchin told CNBC on Tuesday that he believed the United States could also reach a trade deal with Canada this week. Mexico and the United States have reached a commercial understanding.

Revamping trade deals with Mexico and Canada is not a bad thing, even if the president insists on scrapping the title of NAFTA altogether.

Matt Blunt, president of the American Automotive Policy Council, which represents General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV, said the group was optimistic about the new deal, though it was still reviewing the details.

In a statement, Trump said "America has ... finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our Nation's wealth".

But some economists argue hefty tariffs on cars and other products could lead to a trade war that may only harm a booming U.S. economy.