The United States has reached a separate trade agreement with Mexico, the Trump administration said on Monday.
The preliminary agreement is valid for 16 years and comes as part of Trump’s promise to renegotiate the North American Free Trade Agreement (NAFTA).
“After a year of tough negotiations, the United States and Mexico reached a trade agreement that is fair and reciprocal and will strengthen both nations’ economies,” the U.S. Vice President, Mike Pence, said commenting on the United States–Mexico Trade Agreement.
“Our nations have agreed to new rules that will maintain duty free access for agricultural goods on both sides of the border. In addition, we have agreed to eliminate non-tariff barriers and take other steps to encourage more agriculture trade between our two countries.”
Commenting on the deal, President of Mexico Peña Nieto said that it would be great if Canada would join the deal.
“It is our wish, Mr. President, that now Canada will also be able to be incorporated in all this. And I assume that they going to carry out negotiations of the sensitive bilateral issues between Mexico — rather, between Canada and the United States,” he said.
Trump said that the talks with Canada haven’t started yet, but voiced his expectation that the negotiations would start shortly.
“You know, they have tariffs of almost 300 percent on some of our dairy products, and we can’t have that. (…) I think with Canada, frankly, the easiest thing we can do is to tariff their cars coming in. It’s a tremendous amount of money and it’s a very simple negotiation,” Trump added.
Once, and if a deal, with Canada is reached, Trump said it would terminate the existing NAFTA agreement as it was deemed to be detrimental to the U.S. economy.
Based on the data released by the White House, NAFTA contributed to ballooning annual goods trade deficit, which grew from USD 115 billion in 1993, the year before NAFTA’s implementation, to nearly USD 800 billion in 2017.
The United States went from a USD 1.6 billion goods trade surplus with Mexico to a USD 70 billion goods trade deficit during that same time period, the White House said.
“Coming to terms with Mexico is an encouraging sign, but threatening to pull out of the existing agreement is not. NAFTA supports millions of U.S. jobs and provides hardworking American families access to more products at lower prices.
“To preserve these benefits and protect complex, sophisticated and efficient supply chains, the administration must bring Canada, an essential trading partner, back to the bargaining table and deliver a trilateral deal,” President and CEO of National Retail Federation (NRF) Matthew Shay, pointed out.
According to an AT Kearney study prepared for the National Retail Federation and other retail associations, without NAFTA, American retailers and consumers would face up to USD 16 billion a year in higher costs.