Trump Reaches Revised Trade Deal With Mexico, Threatening to Leave Out Canada

President Trump with Mexico’s trade negotiators on Monday.

WASHINGTON — President Trump said on Monday that the United States and Mexico had reached an accord to revise key portions of the North American Free Trade Agreement and would finalize it within days, suggesting he was ready to jettison Canada from the trilateral trade pact if the country did not get on board quickly.

Speaking from the Oval Office, Mr. Trump promoted the preliminary agreement with Mexico as a deal that could replace Nafta and threatened to hit Canada with auto tariffs if it did not “negotiate fairly.”

“They used to call it Nafta,” Mr. Trump said. “We’re going to call it the United States-Mexico Trade Agreement,” adding that the term Nafta — which he has called the “worst” trade deal in history — had “a bad connotation” for the United States.

Yet while Mr. Trump may try to change the name, the agreement reached with Mexico is simply a revised Nafta, with updates to provisions surrounding the digital economy, automobiles, agriculture and labor unions. The core of the trade pact — which allows American companies to operate in Mexico and Canada without tariffs — remains intact.

Now, the question becomes whether a trilateral pact becomes a bilateral deal — or Mr. Trump’s threats pressure Canada to return to the negotiating table and accede to many of the United States’ demands.



Trudeau Pushes Back Against U.S. Tariffs

At the G-7 summit, Prime Minister Justin Trudeau of Canada expressed his opposition to President Trump’s trade policies and American tariffs on Canadian steel.

I told the president that we would be moving forward with retaliatory equivalent tariffs as of July 1, and he expressed to me that he thought that would be a mistake. And I certainly agree that it’s not something that we want to do. We do not want to harm American workers. We do not want to harm trade between Canada and the United States. But the administration’s choice to impose illegal and unacceptable tariffs, illegitimate and unacceptable tariffs to Canadian steelworkers and autoworkers and on the Canadian economy, must be met with an equivalent response. We know a renegotiated Nafta is good for Canada, good for the United States and good for Mexico. And as the president, the vice president, many people have said, it’s possible to get to a win-win-win, and that’s exactly what we are going to continue to work to do. If you put an expiry date on a trade deal, that’s not actually a trade deal. So that’s our unequivocal position. There will not be a sunset clause. Canada has been unequivocal that we will not, cannot sign a trade deal that expires automatically every five years. That is not a trade deal.

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At the G-7 summit, Prime Minister Justin Trudeau of Canada expressed his opposition to President Trump’s trade policies and American tariffs on Canadian steel.CreditCredit...Doug Mills/The New York Times

The president’s apparent willingness to move on without Canada prompted confusion and concern among lawmakers — who said it may not be legally permissible, let alone smart — and businesses whose supply chains depend on a deal encompassing all three countries.

“Because of the massive amount of movement of goods between the three countries and the integration of operations which make manufacturing in our country more competitive, it is imperative that a trilateral agreement be inked,” Jay Timmons, the president and chief executive of the National Association of Manufacturers, said in a statement.

Mexican officials said on Monday that they wanted to have Canada back in the process and were working toward a trilateral deal by the end of the week. President Enrique Peña Nieto of Mexico, who joined the White House announcement via phone, said, “It is our wish, Mr. President, that now Canada will also be able to be incorporated in all this.”

But later in the day, Luis Videgaray Caso, Mexico’s foreign minister, signaled that Mexico might be willing to move forward without Canada.

“There are things that we don’t control, particularly the political relationship between Canada and the U.S., and we definitely don’t want to expose Mexico to the uncertainty of not having a deal,” Mr. Videgaray said in an interview. “Not having a trade agreement with the U.S., that’s a substantial risk to the Mexican economy. Literally millions of jobs in Mexico depend on access to the U.S. market.”

Both the Mexicans and the Americans have been eager to reach a fully revised deal by the end of August, a date that would give the Trump administration enough time to notify Congress that a deal had been finalized and still have that deal be signed by the outgoing Mexican administration of Mr. Peña Nieto.

“Ideally we’ll have the Canadians involved,” said Robert Lighthizer, the United States trade representative, adding that the administration planned to officially inform Congress by Friday of its intent to sign a new deal, a step required before Congress votes on a trade pact. “If we don’t have Canada involved, we will notify that we have a bilateral agreement that Canada is welcome to join.”

Chrystia Freeland, the Canadian foreign minister, will travel to Washington on Tuesday to continue negotiations, said her spokesman, Adam Austen, on Monday.

“We will only sign a new Nafta that is good for Canada and good for the middle class,” Mr. Austen added. “Canada’s signature is required.”

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The revised deal with Mexico makes significant alterations to rules governing automobile manufacturing, in an effort to bring more car production back to the United States from Mexico. Those changes are being watched carefully by the United States auto industry, which has built its global supply chain around Nafta and expressed concern that the Trump administration’s efforts to rewrite it could raise prices of American-made cars and trucks. Automakers like General Motors and Ford have set up plants in Canada and Mexico, and American automakers routinely import car parts from other countries.

Under the changes agreed to by Mexico and the United States, car companies would be required to manufacture at least 75 percent of an automobile’s value in North America under the new rules, up from 62.5 percent, to qualify for Nafta’s zero tariffs. They will also be required to use more local steel, aluminum and auto parts, and have 40 to 45 percent of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada and a win for labor unions, which have been among Nafta’s biggest critics.

“Automakers urge the U.S. and Mexico to quickly re-engage with Canada to continue to build on this progress,” the Alliance of Auto Manufacturers, which represents most carmakers that sell vehicles in the United States, said in a statement. “The industry is hopeful that any changes to Nafta auto rules of origin continue to strike the right balance by incentivizing production and investment in North America while keeping new vehicles affordable for more Americans.”

In a briefing Monday, administration officials said the United States and Mexico had also reached an agreement over a “sunset clause,” proposed by the Trump administration, that would cause Nafta to automatically expire unless the three countries voted to extend it.

The two countries agreed to a review of the trade pact every six years that would extend its lifetime for 16 more years, officials said. That longer time horizon would give lawmakers a chance to review the pact’s progress, while giving businesses certainty for the near future.

The countries also agreed to limit the kinds of legal challenges that investors can make against foreign governments under Nafta. The oil and gas, infrastructure, energy generation and telecom industries are exempted from these more restrictive rules, and will operate under the previous terms, Mr. Lighthizer said — a win for those industries.

One contentious issue that remains unresolved is whether the administration will exempt Mexico from its steel and aluminum tariffs. Mr. Trump hit Mexico, along with Canada, the European Union and other nations, with 25 percent tariffs on steel and 10 percent tariffs on aluminum, in part to force concessions on other trade issues. Mexican officials said they expected the tariffs to be addressed down the road.

“I don’t think it was necessary to address them now,” Mr. Videgaray said. “We’d like those to be addressed alongside Canada. It would be great if we could have a trilateral agreement on lifting those and our retaliatory tariffs on U.S. goods.”

It is unclear how eager Canada will be to sign on to the revised deal. Relations between the United States and Canada have been strained for months and Mr. Trump has personally berated Prime Minister Justin Trudeau of Canada as “very dishonest and weak” and accused him of “false statements” after a tense meeting of global leaders in June.

Any agreement that does not involve Canada is likely to face legal challenges and intense opposition from Congress, which had granted the Trump administration authority to renegotiate Nafta as a trilateral deal.

“Nafta is a trilateral agreement. It requires legislation and a change to Nafta requires legislation,” said Senator Patrick J. Toomey, Republican of Pennsylvania. “I’ve told them any change has to go through Congress. There is not necessarily complete agreement about that.”

Senator Lamar Alexander, Republican of Tennessee, said no one “is envisioning” a revised Nafta that does not include Canada.

“Modernizing it is a good thing, but I hope the president takes whatever agreement he has with Mexico and gets one properly with Canada and we get back to business,” Mr. Alexander said.

Industry groups also said a final agreement must include Canada.

“Coming to terms with Mexico is an encouraging sign, but threatening to pull out of the existing agreement is not,” said Matthew Shay, the chief executive of the National Retail Federation. “The administration must bring Canada, an essential trading partner, back to the bargaining table and deliver a trilateral deal.”

The president, flanked by advisers including Mr. Lighthizer and Jared Kushner, hailed the preliminary agreement as “a big day for our country,” adding that “many people” had thought that no one could make a deal with Mexico.

Mr. Peña Nieto, who has at times exchanged harsh words with Mr. Trump as the two countries have squabbled over Mr. Trump’s proposed wall along their border, added a moment of praise on Monday.

“I recognize your political will,” Mr. Peña Nieto said, “and your participation in this.”

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