President Trump heralded a tentative trade deal with Mexico on Monday as a big win for his get-tough trade policies, which he said put Canada on the spot to start its own negotiations with the U.S. or face higher tariffs on autos.
Mr. Trump claimed to have delivered on his threat to scuttle the 24-year-old North American Free Trade Agreement and haggle a better deal for U.S. workers and businesses.
“It’s a big day for trade. It’s a big day for our country,” said Mr. Trump, speaking in the Oval Office. “A lot of people thought we would never get here because we all negotiate tough. We do. So does Mexico.”
He wanted to get rid of the name NAFTA, which had “a bad connotation because the United States was hurt very badly by NAFTA for many years,” he said.
The breakthrough increases pressure on Canada, which has been on the sidelines, to rejoin negotiations with the U.S. and Mexico.
It also puts other countries on notice that Mr. Trump isn’t backing down from his “America first” trade policies and his use of tariffs to force concessions from major trading partners such as China and the European Union.
Mr. Trump’s bare-knuckle negotiating got the EU last month to start working on a zero-tariff deal with the U.S. Those talks are continuing.
Wall Street celebrated news of a U.S.-Mexico free trade deal with a buying frenzy, pushing the Dow Jones industrial average up 259 points, or 1 percent, to close above 26,000.
The tentative deal would set higher “Made in America” standards for vehicles, boost wages for Mexican workers, keep agricultural products free of tariffs, establish increased environmental standards in Mexico, and overhaul rules to protect copyrights and intellectual property.
The agreement would last 16 years, with an opportunity to review it and adjust the terms after six years.
Mr. Trump has called the 1994 three-way NAFTA the “worst trade deal ever made.” He threatened to rip it up if Mexico and Canada wouldn’t agree to a rewrite. The announcement appeared to make good on that threat.
NAFTA is blamed for hastening the demise of U.S. manufacturing as automakers and other manufacturers moved factories south of the Rio Grande.
The NAFTA talks have dragged on for a year.
The president said he wanted to terminate NAFTA and get the new deal signed with Mexico, and maybe Canada too, as soon as possible.
U.S. Trade Representative Robert Lighthizer said the U.S.-Mexico deal would be submitted to Congress for a required 90-day holdover, setting up a signing ceremony in November.
However, scrapping NAFTA and creating a new bilateral deal could run afoul of the negotiating authority that Congress granted the president.
If Congress has to ratify a new trade pact, an arduous debate could erupt.
Rep. Kevin Brady, Texas Republican and chairman of the House Ways and Means Committee, commended Mr. Trump on forging a deal for the benefit of American workers, farmers and local businesses.
“I look forward to carefully analyzing the details and consulting in the weeks ahead with my colleagues and constituents to determine whether the new proposal meets the trade priorities set out by Congress under Trade Promotion Authority,” Mr. Brady said.
He and other Republican leaders expressed their desire to include Canada in a three-way deal.
So did the Business Roundtable, an association of CEOs of top U.S. companies that often sides with Republicans.
“Replacing NAFTA with one or two bilateral agreements would create more regulatory burdens, disrupt North American supply chains and hurt U.S. workers and businesses. Any effort to withdraw from NAFTA altogether would endanger millions of U.S. jobs and harm the competitiveness of U.S. companies,” the group said.
Rep. Bill Pascrell Jr. of New Jersey, the top Democrat on the House Ways and Means Committee, also stressed that NAFTA was a trilateral agreement.
“So today’s ballyhooed announcement notwithstanding, I view this as a progress report with negotiation still continuing between our three nations. After decades of failed Republican economic policies, too many of our workers have been left behind. NAFTA, and trade policy generally, is key to ensuring a fair economy that works for everyone, not just those at the top,” Mr. Pascrell said.
In making the Oval Office announcement, Mr. Trump spoke on speakerphone with Mexican President Enrique Pena Nieto.
After the White House stumbled in activating the speakerphone, Mr. Pena Nieto’s voice crackled in Spanish in the room as Mr. Trump listened intently and reporters looked on.
The two leaders congratulated each other on the breakthrough deal.
Mr. Pena Nieto called the new trade pact “something very positive for the United States and Mexico.”
He said he hoped Canada would be able to join the agreement soon.
U.S. and Mexico teams rushed to strike a deal this year before the inauguration of Mexican President-elect Andres Manuel Lopez Obrador, a far-left politician who some feared would derail the talks.
However, the Mexico negotiators coordinated with Mr. Lopez Obrador.
Mr. Pena Nieto said Mr. Lopez Obrador and Mr. Trump would all toast with a shot of tequila at a signing ceremony for the deal.
After the Oval Office event, Canadian Foreign Affairs Minister Chrystia Freeland announced plans to travel to Washington to revive trade talks with the U.S.
“As we have said all along, progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement,” Ms. Freeland’s spokesman said. “We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required.”
Mr. Trump said he would soon kick off those talks with a phone call to Canadian Prime Minister Justin Trudeau, with whom he has had a rocky relationship.
He threatened new tariffs on vehicles from Canada if it doesn’t join the deal or strike a separate agreement with the U.S.
“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. It could end in one day, and we take in a lot of money the following day,” he said. “But I think we’ll give them a chance to probably have a separate deal.”
The tentative deal tackles the chief sticking points for the Trump administration, which centered on automobile manufacturing. Mexico agreed to raise the minimum level of North American components in an automobile to qualify for tariff-free treatment under NAFTA from 62.5 percent to 75 percent.
Mr. Trump had proposed boosting the “Made in America” provision to 85 percent.
Mexico also agreed to raise wages for manufacturing workers in northern Mexico, where automakers opened scores of factories to take advantage of cheap labor.
Under the deal, 40 percent to 45 percent of auto content must be made by workers earning at least $16 per hour.
Matt Blunt, president of the American Automotive Policy Council, which represents General Motors, Ford Motor Co. and Fiat Chrysler Automobiles, gave a thumbs-up to the deal.
“We are optimistic that the new agreement will maintain and encourage the ongoing competitiveness of the United States and North American auto industries,” he said.
Thomas J. Gibson, president of the American Iron and Steel Institute, said NAFTA had benefited the steel industry but was overdue for an update.
While saying Canada needed to be included, he applauded the new manufacturing rules. He said they “will further incentivize the use of North American steel in automobile production throughout North America.”
Labor leaders, who find themselves in the unusual position of siding with a Republican administration, withheld judgment on the tentative deal.
“NAFTA has had a devastating impact on workers for more than 25 years. We are aggressively engaged in pursuing an agreement that works for working people in all three countries, and we are not done yet,” five union leaders said in a joint statement. “Any new deal must raise wages, ensure workers’ rights and freedoms, reduce outsourcing, and put the interests of working families first in all three countries.”
The statement was signed by AFL-CIO President Richard Trumka; United Steelworkers International President Leo Gerard; United Automobile, Aerospace and Agricultural Implement Workers of America President Gary Jones; International Union, International Association of Machinists and Aerospace Workers International President Robert Martinez Jr.; and Communications Workers of America President Chris Shelton.