US, Mexico reach new trade agreement

U.S. and Mexico make NAFTA breakthrough, increasing chances of final deal

Donald Trump has announced a trade "understanding" with Mexico that could lead to an overhaul of the North American Free Trade Agreement (Nafta).

In fact, on Monday Trump demonstrated this fact on live television ahead of his call with Mexico president, Enrique Peña Nieto.

Earlier on Monday, Trump had tweeted about "A big deal looking good with Mexico".

Al Jazeera's Kimberly Halkett, reporting from Washington, DC, said Trump was "delivering" on promises made during his successful presidential campaign to renegotiate major trade deals affecting USA workers.

Mexican President Enrique Pena Nieto told Trump his country wants to incorporate Canada into the new trade agreement.

Trump says: "We could have a separate deal (with Canada) or we could put it into this deal."US president Donald Trump says he'll be "terminating" the North American Free Trade Agreement as he pursues a deal with Mexico and starts negotiations with Canada".

U.S. Trade Representative Robert Lighthizer said that if finalized and approved by Congress, the new trade agreement with Mexico would take effect in November, after a 90 day waiting period.

The breakthrough between the US and Mexico involved an agreement on the amount of North American content a vehicle must have in orderto pass duty-free across borders. Monday's bilateral agreement and the threat of auto tariffs could pressure Canada, which has warned it won't rubber stamp anything.

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Foreign Affairs Minister Chrystia Freeland is cutting short a diplomatic trip to Europe to re-enter the high-level talks in Washington on Tuesday. And it would require a set proportion of auto components be made by workers earning at least $16 an hour.

Once a U.S. -Mexico agreement is reached, Canada is expected to rejoin the negotiation. "We'll see what happens", Trump said, adding that Mexico's election was "better than anticipated". But what Trump's going for here is headlines saying he won ... and too many US media outlets will probably give him that.

The NAFTA talks have dragged on for more than a year.

"We are starting negotiations with Canada pretty much immediately", Trump said.

Matt Blunt, president of the American Automotive Policy Council, which represents General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV, said the group was optimistic about the new deal, though it was still reviewing the details. Currently, about 62% of parts are required to be produced in the United States, Mexico or Canada.

Markets are also happy about Monday's announcement because nothing is changing anytime soon.

Under the tentative new NAFTA agreement, vehicle companies that want to benefit from the free trade bloc will have to make more of an automobile's total worth in one of the three countries.

Footage of Trump attempting to connect the call went viral among journalists, pundits and political observers.

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