U.S., Mexico Reach Trade 'Understanding' That Could Lead To NAFTA Overhaul

Traders work on the floor of the NYSE in New York

With the USA holding its mid-term elections on November 6, Heyman said the likelihood of Trump's trade threats toward Canada becoming reality is slim.

The sides also agreed that 40-45 percent of cars must be made at "high wage" factories where workers receive $16 an hour in order to receive duty-free treatment, something that could deter off-shoring USA auto manufacturing to Mexico.

Canada is now locked in a tariff battle with Trump.

A source in South Korea's auto industry said many automakers would find it hard to meet the rule on workers' wages, which are much cheaper in Mexico.

Canadian Foreign Minister Chrystia Freeland gestures during a joint news conference on the closing of the seventh round of NAFTA talks in Mexico City, Mexico, March 5, 2018.

"Essentially what this [deal] seems to do is update the 24-year-old agreement with respect, particularly, to the manufacturing sector, particularly when it comes to cars, an area that was decimated in many respects because of NAFTA", Halkett said.

Midwestern farmers hope the proposed trade agreement between the United States and Mexico may be a sign that the trade disputes wreaking havoc on corn and soy prices are coming to an end.

Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, Lighthizer said. We'll get rid of the name NAFTA.

The president says he will be calling Canadian Prime Minister Justin Trudeau. "Even so, news of the deal still buoyed markets, although the currency market reaction was a little more interesting". The Mexicans said they still want a three-way deal.

That said, the agreement with Mexico is not insignificant.

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United States business groups sought to remind the administration that Canada remains its largest export market. It also requires that 75 percent of the parts of cars sold in North America be produced in the U.S. or Mexico.

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Earlier in the day, a spokesperson for Freeland said: "Canada is encouraged by the continued optimism shown by our negotiating partners".

The clock is ticking for Canada to come to a trade agreement with the USA after Donald Trump gave an ultimatum - sign an agreement by Friday, or else.

But Canadian officials said US negotiators are still working toward a three-way agreement.

The United States Trade Representative said only that they've reached a "preliminary agreement in principle, subject to finalization and implementation".

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

Speaking about Canada, Mr Trump threatened to slap tariffs on Canadian cars if he does not get what he wants.

The leaders "had a constructive conversation" on NAFTA, and "look forward to having their teams engage this week with a view to a successful conclusion of negotiations", Trudeau's office said.

Kerr says Washington state exports $10 billion a year in goods and services to Canada.

None of that stopped Trump from giving the impression on Monday morning that he was "terminating" NAFTA "and going into this deal" with Mexico.

Around 150,000 Washington jobs dependent directly on trade with Mexico.

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