Promogram Canada

US Announces Trade Deal With Mexico

In a special announcement from the Oval Office on Monday, President Donald Trump says he will terminate the North American Free Trade Agreement (NAFTA) and enter into a new trade treaty with Mexico, one he hopes Canada will soon join.

“It’s a big day for trade. It’s a big day for our country,” Trump told reporters.

Mexican president Enrique Peña Nieto joined by conference call, saying he was “quite hopeful” that Canada would soon be part of the agreement. Trump says he plans to call Prime Minister Justin Trudeau “almost immediately” to start negotiations to that effect, but it remains to be seen if Canada will be part of the new treaty. Trump also mentioned the possibility of a separate agreement between the U.S. and Canada.

If Trump indeed does away with NAFTA and enters into a bilateral deal with Mexico, it will mark the most significant shift in trade policy since Trump took office.

“We’re going to call it the United States/Mexico Trade Agreement,” said Trump. NAFTA “has a bad connotation because the United States was hurt very badly by NAFTA for many years.”

The U.S. and Mexico have been engaged in NAFTA talks for the past few weeks, sessions that Canada largely sat out. The negotiations between the U.S. and its neighbor to the south have focused mainly on auto manufacturing. In recent days, trade negotiators from the U.S. and Mexico agreed to an increase in the percentage of each car (from 62.5% to 75%) that must be North American-made to qualify for duty-free benefits.

Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, the head trade negotiator for that country, wrote in an email to Bloomberg that “We will only sign a new NAFTA that is good for Canada and good for the middle class” and “we will continue to work toward a modernized NAFTA.”

Mexico hopes to have an agreement to ratify before President-elect Andrés Manuel López Obrador takes office in December. López Obrador would likely seek to make changes to the treaty if it’s not finished before he takes office.

U.S. politicians welcomed the announcement, but made it clear that any new agreement must include Canada. “This is a positive step, and now we need to ensure the final agreement brings Canada in to the fold and has bipartisan support,” said John Cornyn (TX), the second-ranking Republican in the Senate.

As Canada’s next move remains to be seen, Canadian promo companies are adopting a wait-and-see attitude. “It will be interesting to see how negotiations with Foreign Affairs Minister Freeland go over the next few days,” Danny Braunstein, vice president of sales and business development for Talbot Marketing (asi/341500), told Counselor. “I don’t expect Canada will sign anything this week, especially in light of some of the harsh comments Trump has made about Canada and our Prime Minister. It seems this is a PR campaign intended to divert attention from US domestic issues rather than a significant development in NAFTA negotiations. We’ll be watching closely, but I don't expect that this will have much effect on our industry for the foreseeable future.”

Stan Gallen, senior vice president of sales and marketing at Debco (asi/48885), says the drawn-out process has been frustrating for those whose business interests could hang in the balance. "It’s disheartening that we’ve been unable to iron out an equitable agreement between ourselves and the US," he told Counselor.  "Nevertheless, there’s a strong belief among Canadians that our enduring partnership with our neighbors will result in a realization that we're both stronger when we work together to facilitate fair trade and prosperous commerce. It would be difficult to conceive of a scenario in which no agreement is made. I’m confident that something positive will come of all the posturing and bravado that have accompanied this very tiring couple of years, as we navigate the road to a new NAFTA."