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The Truth About Trump’s ‘Tremendous’ New Trade Deal with Mexico

Yuval Rosenberg

After months of fractious negotiations, President Donald Trump on Monday announced that his administration has reached an understanding with Mexico on a new 16-year trade deal to replace the North American Free Trade Agreement (NAFTA).

“This is a tremendous thing,” Trump said from the Oval Office, adding that he’s scrapping the name NAFTA because it “has a lot of bad connotations” and instead is calling this deal “the United States-Mexico Trade Agreement.”

Among the key elements of the deal:

  • It requires 75 percent of an automobile's value to be manufactured in North America, up from 62.5 percent under NAFTA.
  • It requires 40 percent to 45 percent of a car to be made by workers earning at least $16 an hour.
  • No new tariffs would be imposed on agricultural goods traded between the U.S. and Mexico, according to reports.

But some key details and questions must still be addressed, including:

What about Canada? The U.S. neighbor to the north has been on the sidelines while the U.S. negotiated with Mexico. Trump said “we’ll see” if Canada can be part of the new deal. Negotiations with Canada were set to commence “immediately,” Trump said. But the president has often expressed a preference for bilateral deals — and he threatened again Monday to impose tariffs on Canadian car imports in response to Canadian tariffs on U.S. dairy products. “Top White House officials appeared split on whether they would proceed at all if Canada didn’t sign on to the deal with Mexico,” The Washington Post reported. Meanwhile, Mexico’s president made clear Monday he wants Canada to be part of the updated agreement.

What about Congress? Any trade deal would have to be approved by Congress, and that’s not a slam dunk. “Congress gave Trump the authority to do only a trilateral deal, with both Canada and Mexico,” The Washington Post’s Heather Long explains. “Many members, in sending their initial reactions to the deal, called on Trump to bring Canada into the fold. If he ends up submitting a bilateral deal, with just Mexico, it increases the chances that lawmakers will balk.”

Can it all get done in time? The White House reportedly plans to send Congress a letter by Friday to formally start a 90-day process for changing NAFTA. Getting that done by the end of the month is important because negotiators want to clinch a deal in time for Mexico’s Congress to ratify it before the newly elected Mexican president, left-wing populist Andrés Manuel López Obrador, takes office in December. López Obrador would likely seek some changes to the deal.

Some sticking points remain, even with Mexico. “The White House and Mexican officials were unable to reach an agreement about the steel and aluminum tariffs Trump imposed several months ago, and those discussions are ongoing,” according to The Washington Post. Paul Waldman, a liberal columnist at the Post, writes that Trump’s celebratory announcement Monday was premature: “It’s entirely possible that at the end of all this we’ll end up with a version of NAFTA that serves Americans better than the current one. But despite what Trump says, victory is still a long ways off.”

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