Donald Trump secures deal with Mexico

Donald Trump has moved to transform the world’s largest trade pact by striking a deal with Mexico that would recast NAFTA.

Donald Trump on the phone to Mexican President Enrique Pena Nieto yesterday. Picture: AP

Donald Trump has moved to transform the world’s largest trade pact by striking a deal with Mexico that would recast NAFTA to make it more favourable to the US.

In a crucial but still tentative breakthrough, the US President said yesterday he had struck a new trade deal with Mexico that could replace the 24-year-old NAFTA.

The agreement comes after more than a year of difficult negotiations and gives Mr Trump a needed boost on trade amid the escalation of his tariff war with China. The US-Mexico deal could still collapse if Canada, the third party in the three-nation NAFTA, cannot be persuaded to join.

Mr Trump said Canada would be invited to join but only if it was willing to “negotiate fairly”.

“It’s a big day for trade. It’s a big day for our country,” Mr Trump said as he spoke with Mexican President Enrique Pena Nieto by telephone from the White House.

“This is something very special for our manufacturers and our farmers ... it makes it a fairer bill.”

Mr Pena Nieto told Mr Trump “I think this is something very positive for the US and Mexico”.

The formation of the new pact, which would require congressional approval, may depend on Canada. Mr Pena Nieto said he wanted Canada to be a part of the new deal and it was not clear whether the US-Mexico pact could go ahead if Canada were to oppose it.

Mr Trump said he would discuss Canada’s involvement with the country’s Prime Minister, Justin Trudeau. “If they’d like to negotiate fairly, we’ll do that,” he said although he left open the possibility that Canada could be cut from a new US-Mexico deal.

Mr Trudeau’s office said he and Mr Trump had a “constructive conversation”. The Prime Minister has dispatched Foreign Minister Chrystia Freeland to Washington for talks today.

“The leaders welcomed the progress that has been made in ­discussions with Mexico and look forward to having their teams ­engage this week with a view to a successful conclusion of negoti­ations,” the Trudeau office said.

Mr Trump said he wanted the new pact to be called the US-Mexico Trade Agreement rather than NAFTA, although this would presumably change if Canada were included. Mr Trump said the name NAFTA had “bad connotations”.

A spokesman for Ms Freeland said Canada’s approval was needed for any new trade act. “We will only sign a new NAFTA that is good for Canada and good for the middle class ... Canada’s signature is required,” he said.

The renegotiation of NAFTA has been a core promise of Mr Trump, who has described the trade pact as a “disaster”, saying it ripped off American workers. He argues that NAFTA, as it stands, encourages US companies to operate in Mexico using local workers to avoid paying the higher labour costs in the US.

The US-Mexico agreement is a timely one for Mr Trump, whose “America First” trade policy sees him in an escalating trade war with China over tariffs. Early last year, shortly after he assumed office, Mr Trump pulled the US out of the Trans-Pacific Partnership trade pact claiming it was a bad deal for American workers.

The US-Mexico deal tries to ensure more cars are built on the continent using locally produced steel and with higher wages for the labour force. It calls for 75 per cent of cars produced in the bloc to get duty-free benefits, up from 62.5 per cent and says 40-45 per cent of cars must be made by workers earning at least $US16 an hour.

In a briefing, US officials said the deal would boost regional content requirements for steel, chemicals and industrial products as well as strength supply chains.

Until now, the administration’s efforts to renegotiate NAFTA had been unable to secure a breakthrough, with Mexico and Canada unwilling to accept new terms that would disadvantage them.

Cameron Stewart is also US contributor for Sky News Australia