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US, Mexico reportedly close to finalizing new NAFTA deal

The United States and Mexico have reportedly reached a preliminary agreement to revise parts of the North American Free Trade Agreement. In above photo, Canadian Minister of Foreign Affairs, Chrystia Freeland (left), Mexican Economy Minister Idelfonso Guajardo (center) and U.S. Trade Representative Robert Lighthizer chat March 5 during NAFTA talks in Mexico City. (RONALDO SCHEMIDT/AFP/Getty Images)

The United States and Mexico have reportedly reached a preliminary agreement to revise parts of the North American Free Trade Agreement. Canada still needs to join the agreement, and any deal would need to be approved by Congress before it can go into effect.

During a phone call on Monday with Mexican President Enrique Peña Nieto, President Donald Trump said that if Canada could not agree to the deal, he would "like to call this deal the U.S. and Mexico Trade Agreement," adding that NAFTA had a "lot of bad connotations.

What is NAFTA?

NAFTA was signed in 1992 and went into effect on Jan. 1, 1994. The deal created a free trade policy among the U.S., Canada, and Mexico.

Trump repeatedly criticized NAFTA, calling it “the worst trade deal in history.”

What happened now?

The deal isn't done yet. Canada has not been involved this latest round of negotiations. Once Canada rejoins the talks, there will be at least another week of work, Mexican Economy Minister Ildefonso Guajardo said Sunday, Reuters reported on Sunday. However, he insisted that “we’ve continued making progress.”

On Saturday, Trump tweeted:

Trump tweeted on Monday morning that that a “big deal” with Mexico was “looking good.”

During a televised call on Monday with Peña Nieto, Trump praised the trade deal. He also said that NAFTA would be terminated, although he gave no clear indication as to when that might happen. Trump also called the deal that involved two-thirds of the original members of NAFTA “one of the largest trade deals ever made. Maybe the largest trade deal ever made.”

Trump said that Canada wanted to join a trade deal, but if they failed to reach an agreement he would place heavy tariffs on imports of cars from Canada.

U.S. Trade Representative Robert Lighthizer said that if finalized and approved by Congress, the new trade agreement with Mexico would take effect in November, after a 90 day waiting period.

What's in the new version of the deal?

Under the tentative new NAFTA agreement, car companies that want to benefit from the free trade bloc will have to make more of an automobile's total worth in one of the three countries. A greater percentge of steel and aluminum used in automobile manufacturing would also need to come from North America. A percentage of workers for car manufacturers would also have to make more than $16 an hour.

The last stipulation helps the U.S. and Canada, where wages tend to be higher, and fixes a long time gripe of those who opposed NAFTA, by reducing the incentive for car manufacturers to move factories to Mexico where workers can be paid lower wages than is legal in the U.S. and Canada.

There are still questions about how these would work with tariffs on auto imports enacted by the Trump administration.

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