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28 Aug, 2018 11:01

US trade deal with Mexico smashes NAFTA & puts squeeze on Canada

US trade deal with Mexico smashes NAFTA & puts squeeze on Canada

The preliminary trade agreement between the US and Mexico is putting intense pressure on Canada – the third party of the once-trilateral trade pact which is currently being re-negotiated by US President Donald Trump.

According to Trump, the new, as-yet-unratified deal is set to replace the current North American Free Trade Agreement (NAFTA). The US president has already suggested the new trade alliance should be named ‘United States-Mexico Trade Agreement’ – unless Canada starts negotiating “fairly.”

The news forced Canadian officials to rapidly arrange a meeting with their US partners. Canadian Foreign Minister Chrystia Freeland reportedly cut short her diplomatic trip to Europe to go to Washington on Tuesday for trade talks. A spokesman for the foreign minister said Canada will sign the new accord only if it is good for the country.

Under the current conditions, Ottawa essentially faces a take-it-or-leave-it offer, which is based on the US-Mexico trade pact. Though details of the new agreement are still unclear, it will predictably become less profitable for Canada than under NAFTA, which was condemned by the US president as the “single worst deal ever approved.”

Though the US and Canada have traditionally enjoyed good trading relations, some 75 percent of Canada’s exports are reportedly bound for the US with only 15 percent of American exports destined for Canada. American businesses could easily divert their exports away from Canada if trade barriers increase, according to research carried out by ScienceDirect. Moreover, Trump has threatened to impose tariffs on imports of Canadian-made vehicles if Ottawa doesn’t relent.

“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,” said Trump.

The draft deal reached by the US and Mexico boosted American stocks to record highs on Monday.

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