On Monday August 27th, US President Donald Trump along with Mexican President Enrique Pena Nieto announced a new agreement between the two countries, to be used to replace the current North American Free Trade Agreement (NAFTA). The new agreement, according to President Trump will be called the United States/Mexico Trade Agreement.
No information was given on the actual agreement itself, but the US President did indicate that he will be looking to terminate the NAFTA deal as soon as the US/Mexico Trade Agreement is finalized.
According to Bloomberg, despite the new deal, NAFTA may still be in place for the foreseeable future. “A spokesman for Canadian Foreign Minister Chrystia Freeland issued a statement on Monday that warned against jumping to conclusions. “Canada’s signature is required,” spokesman Adam Austen said in an email. “We will only sign a new Nafta that is good for Canada and good for the middle class” and “we will continue to work toward a modernized Nafta.””
The biggest issue overcame during the US and Mexico talks were automotive manufacturing. With the US wanting to bring back auto jobs, the “countries are said to have agreed that automakers who don’t comply with the new Nafta rules will pay a 2.5 percent tariff, the same as they would if they skirted the existing Nafta, while any new Mexican plants wouldn’t have a guarantee. That could potentially expose them to U.S. auto tariffs of between 20 percent and 25 percent, which Trump is considering under national security grounds.”
According to Bloomberg, “Other key issues are Chapter 19 anti-dumping panels, which the U.S. wants to kill but which may be a deal-breaker for Canada, as well as Canada’s protected dairy sector, which Trump is targeting to dismantle.”
Regardless of what is actually agreed to, the new US/Mexico or NAFTA deal will not be ratified until the next Congress, which could complicate things further if a Democrat led Congress is not in favor of the deal. In addition the incoming President Andres Manuel Lopez Obrador has yet to sound off on his thoughts of the deal. President Obrador takes office December 1, 2018.