US and Mexico make trade announcement, end NAFTA

Donald Trump.
Donald Trump. Photo credit: Reuters

The United States and Mexico have reached a deal to change the North American Free Trade Agreement, and talks with Canada are expected to begin immediately, US President Donald Trump says.

"They used to call it NAFTA. We're going to call it the United States-Mexico trade agreement," Mr Trump told reporters on Monday.

"We'll get rid of the name NAFTA," he said, adding that the name had a "bad connotation".

The agreement lifted financial markets and opens the door for Canada to return to the negotiations to rework the 1994 US-Canada-Mexico trade deal.

A senior US trade official said there are hopes that a final agreement can be reached by Friday.

Negotiations between the three trade partners have dragged on for more than a year, and repeated threats by Mr Trump that he would ditch the accord have roiled financial markets, putting pressure on the Mexican peso and the Canadian dollar.

Trump said he would talk to Canadian Prime Minister Justin Trudeau soon - though he threatened that it would be easier to put tariffs on Canadian cars instead of including Canada in the agreement with Mexico.

The Mexico-US discussions focused on crafting new rules for the automotive industry, which Mr Trump has put at the heart of his drive to rework the pact he has repeatedly described as a "disaster" for American workers.

The US-Mexico deal would require 75 percent of auto content to be made in the NAFTA region, up from the current level of 62.5 percent, a second US official said.

The deal also would require 40 percent to 45 percent of auto content to be made by workers earning at least US $16 (NZD $24) per hour, the second official said.

"We are now inviting the Canadians in as well and hope that we can reach a fair and successful conclusion with them as well," a senior US trade official told Reuters.

"There are still issues with Canada but I think they could be resolved very quickly," the official said.

Pena Nieto said on Twitter he had spoken to Mr Trudeau late on Sunday and urged Canada to return to the talks with the aim of concluding a three-nation accord "this week."