Trump agrees 'not to terminate NAFTA'

Lauren Perry
May 7, 2017

President Donald Trump says he has agreed to renegotiate the North American Free Trade Agreement, rather than terminate the agreement.

Trump on Wednesday threatened to sign a draft executive order to begin the process to pull the USA out of the North America Free Trade Agreement, but later that day reversed his threat, saying that he would instead urge Congress to renegotiate the deal.

In what the White House described as "pleasant and productive" phone calls with President Enrique Pena Nieto of Mexico and Prime Minister Justin Trudeau of Canada, Mr Trump said he would quickly start the process of reworking the deal. "The reality is, if I'm the government, I put the United States and Mexico on notice that it's now our intention to renegotiate NAFTA".

Today, Trump told reporters, "I decided rather than terminating NAFTA, which would be a pretty big, you know, shock to the system, we will renegotiate".

"I believe that all the conditions to reach a good negotiation exist, that will suit Mexico. and that is also good for the region, for both Canada and the United States", Videgaray told local broadcaster Televisa.

"And I think we'll be successful in the renegotiation, which frankly would be good", adding that it "would be simpler" than killing Nafta.

US President Donald Trump has called it the "worst trade deal in history" and blamed it for the loss of about five million manufacturing jobs since 1994.

When implemented NAFTA erased most trade and tariff barriers between the neighbours, but Mr Trump and other critics have blamed it for deep U.S. job cuts.

In his Twitter post, Trump called America's relationships with the two hemispheric neighbors "very good" and said the prospects of a renegotiated deal are "very possible". It's a view shared by some within the Canadian government - that Trump wants to flex some muscle entering the negotiations, and the threat to pull out is his strongest lever.

Reports that Trump was considering an executive order to withdraw the USA from the pact "sent a shudder through the markets", National Bank analyst Angelo Katsoras said in a research note.

Indeed, some of the president's fellow Republicans warned Trump that an abrupt withdrawal from NAFTA would be unsafe. It would alsohit USA agricultural exports hard. He, as a flexible negotiator, said OK.

Although initially, Trump had directed his anti-NAFTA attacks primarily at Mexico, this week the administration announced the implementation of tariffs on Canadian lumber imports.

While much of the discussions about NAFTA's long-term effects have focused on U.S. -Mexico trade, the milk dispute shows that "not everything on the U.S". Canada is also a top market.

The Mexican and Canadian currencies rebounded in Asian trading after Trump said the USA would stay in NAFTA for now.

The currency ended the session trading at 73.40 US cents, slightly weaker than the Bank of Canada's official Wednesday close of 73.46 USA cents.

Both Canada and Mexico buy a lot of American cars, machinery and food. It has also strongly criticised Canadian controls on U.S. dairy exports into the country.

"We appreciate the efforts of each member of Congress who signed the letter, recognizing the importance of our exports to Mexico while noting that Canadian dairy policies are directly hurting American exports", said Michael Dykes, president and CEO of IDFA.

Other reports by VgToday

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