WASHINGTON
The U.S. and Mexico reached a preliminary agreement Monday to replace a free trade deal that also included Canada.
U.S. President Donald Trump announced he would be terminating the original trilateral agreement, known as the North America Free Trade Agreement (NAFTA). The agreement clears the way for Ottawa to join the trade pact if it can agree to terms with Mexico City and Washington.
Canada could alternatively pursue separate bilateral trade deals with the countries. Trump acknowledged that fact in remarks to reporters in the Oval Office, saying either option could work.
"We will see whether or not we decide to put up Canada or just do a separate deal," Trump said as outgoing Mexican President Enrique Pena Nieto listened via conference call.
"Frankly, the easiest thing we could do is 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'd take in a lot of money the following day. But I think we’ll give them a chance to probably have a separate deal. We could have a separate deal or we could put it in to this deal,” he added.
Negotiations with Canada would begin almost immediately, Trump said, noting that he would "very soon” call Canadian Prime Minister Justin Trudeau.
Trump said the new deal would be named the "United States-Mexico Trade Agreement."
Whether Canada eventually becomes a party to the agreement, any trade deal needs to be ratified by Congress.
The office of the U.S. Trade Representative released a series of statements detailing the agreement's updated criteria, which include increasing the amount of automotive content made in the U.S. and Mexico to 75 percent -- up from 62.5 percent -- in order to be exempt from duties.
It also requires between 40 and 45 percent of auto content be made by employees earning at least $16 per hour.
Negotiations to rewrite NAFTA -- initiated on Trump's insistence -- began a year ago. The free trade pact was a repeated topic of criticism for the president.
Wall Street rallied on news of the U.S.-Mexico agreement as the Dow Jones industrial index soared by as much as 260 points to record highs. The benchmark S&P 500 and Nasdaq also broke records.
