USA and Mexico reach a preliminary trade deal that could replace NAFTA

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U.S. President Donald Trump said Prime Minister Justin Trudeau should expect a call "very soon" to discuss the future of trade on the North American continent.

President Donald Trump, right, arrives in the Oval Office for a telephone call with Mexican President Enrique Pena Nieto on August 27, 2018.

When the reality show spectacle of Trump's Oval Office phone call with Pena Nieto had subsided, senior US officials briefed journalists on a conference call.

But negotiations among the three parties to the 1994 North American Free Trade Agreement whose mutual trade totals about $1 trillion (€910 billion) annually, have dragged on for over a year and Ottawa is unlikely to be rushed into a deal it doesn't want.

Second only to the booming economy, Monday's announcement of a deal with Mexico is the most visible manifestation of Trump's fulfilment of his campaign promises. "It's a really good deal for both countries", Trump said.

The Canadian dollar strengthened to a almost three-month high against its USA counterpart on Tuesday on the prospect of Canada reaching a deal this week to overhaul NAFTA.

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Speaking at the White House on Monday, President Trump said he wanted to change the NAFTA name to the U.S. Mexico Free Trade Agreement.

Republicans in Congress, who are typically supporters of free trade, have pressed the White House to strike a deal, arguing that the relationship has benefited United States farmers and other groups. Before the original free trade agreement in 1987, Canada walked away from the table on it. Companies don't like United States courts because they can be politicized.

"They want to negotiate very badly", Trump said. Then there's this awkward spectacle of Trump trying to patch through the call.

If auto content and wage agreements go forward with Canada on board as well, it could stem the flow of auto sector jobs to lower wage jurisdictions, Unifor president Jerry Dias said. (A de minimis shipment value is the threshold at which a business has to pay duties on goods moving across the border and are subject to more stringent security checks.) Small US businesses or persons shipping goods worth $100 or less to Mexico would not be subject to tariffs and would face simpler customs checks.

President Donald Trump has said it's not the right time for trade negotiations with China, denting expectations for a near-term deal after a breakthrough agreement between the USA and Mexico.

President Trump complained again on Monday about stiff Canadian tariffs on dairy products.

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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 U.S. auto manufacturing to Mexico.

Stock markets worldwide rose to a six-month high on Tuesday as fears of a global trade war receded after Donald Trump announced a US-Mexico trade deal.

Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said: "Canada is encouraged by the continued optimism shown by our negotiating partners". "I like to call this deal the United States-Mexico Trade Agreement". That requirement would deter USA auto manufacturers from moving production to Mexico, where labor costs are lower, something central to Trump's attacks on NAFTA.

"The trade deal with Mexico is definitely a supportive issue", said Phil Flynn, analyst at Price Futures Group in Chicago.

The US-Mexico agreement has tougher new protections for collective bargaining, and requires 40 percent of autos receiving duty-free treatment to come from factories where workers make at least US$16 an hour.

Under the current law, about 62% of the parts in any auto sold in North America must be produced in the region or automakers have to pay import taxes.

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