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NAFTA Talks Put on Hold

Despite pressure from President Donald Trump to hammer out a new North American Free Trade Agreement (NAFTA) deal, negotiators are taking a break from the heated discussions until May 7.

After leeway was made on Friday, trade talks between Canada, Mexico and the United States have paused until U.S. Trade Representative Robert Lighthizer returns from his trip to China, Reuters reported.

About one year ago, Lighthizer notified Congress of the Trump administration’s plan to reopen NAFTA talks. Trump has been critical of the current agreement and has threatened on multiple occasions to withdraw from NAFTA if the deal wasn’t – in the mind of the U.S. president – friendlier toward U.S. interests.

Meanwhile, business leaders in the promotional products industry have kept an eye on NAFTA talks and have expressed concern that a renegotiated deal could result in trade tariffs and other new restrictions. The main worry is that a new agreement could inhibit commerce across national borders, ramping up pricing and hurting sales.

One of the main sticking points in negotiations has been how much content in a vehicle should be sourced from within the NAFTA region to qualify it for duty-free status. U.S. negotiators initially demanded that North American-built vehicles contain 85% content made in NAFTA countries, but that has since been reduced to 75%, with production of certain components specified in areas that pay higher wages. The goal is to preserve manufacturing in the U.S. and Canada while putting pressure on lower Mexican auto wages.

Initially, the Trump administration threatened to impose sanctions on Canadian and Mexican steel and aluminum starting May 1 if not enough progress had been made. Sources are unclear whether that deadline has also been postponed.

However, the window of opportunity for bringing the new deal to fruition is rapidly closing as Mexico’s elections are approaching on July 1. Meanwhile, timelines set out in U.S. trade law mean a deal is almost certainly needed this month if it has a chance of passing in the current Congress, Bloomberg reported.