Kudlow says Trump will force Canada’s hand on trade, here’s how

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USA stock indexes hit fresh records Monday as the United States and Mexico struck a tentative a bilateral trade deal that's expected to replace the 24-year old North American Free Trade Agreement. The president also suggested he might leave Canada out of the new agreement - which would be called the "United States-Mexico Trade Agreement".

When the reality show spectacle of Trump's Oval Office phone call with Pena Nieto had subsided, senior US officials briefed journalists on a conference call.

Second only to the booming economy, Monday's announcement of a deal with Mexico is the most visible manifestation of Trump's fulfilment of his campaign promises.

While the full text and details of the U.S. -Mexico deal have not been published yet, officials from both countries told S&P Global Platts that the new agreement would not significantly change the so-called Investor-state dispute settlement (ISDS) mechanism that gives protection to foreign companies that have invested in the oil and gas industry. "Hopefully they'll come on board but if not, we'll move on with Mexico".

On the US side, also participating in the call were US Trade Representative Robert Lighthizer and Trump's adviser and son-in-law Jared Kushner. It lacks a previous US demand to erect trade barriers to protect seasonal USA fruit and vegetable growers from Mexican competition. Moore says a wage hike is needed to bring more help to middle class workers.

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Negotiations on rewriting the three-country NAFTA agreement began about a year ago.

Rep. Ron Estes, a Republican seeking re-election in the 4th District, called the prospects of a new deal "great news" that signals a breakthrough in negotiations. Trump and some of his aides argued that Canada could be excluded from the agreement if they object to its terms. A key element of the US-Mexico talks has been content requirements for autos, which Mexico reportedly agreed to increase to 75 percent from North America to get duty free NAFTA treatment.

"We've made a lot of progress with Canada", Mr. Mnuchin said in an interview with CNBC Tuesday morning.

The president is critical of Canada's lopsided treatment of the USA, especially with the northern nation's tariffs on dairy products that be almost 300 percent.

Trump and Pena Nieto have also agreed that 40 to 45 per cent of each auto manufactured must be build by workers earning more than $16 an hour.

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In a press release, The White House announced it has secured a preliminary agreement with Mexico that "modernizes and rebalances the trade relationship to reflect the realities of the 21st century".

Instead, senior United States officials told reporters the agreement had been extended for 16 years but would be reviewed every six years.

"Canada, we will start negotiations shortly". Asked about whether Mexico would be willing to sign a deal without Canada, a senior Administration official demurred, offering arguments for why the country might want to without saying that it would.

US law requires a three-month waiting period after a deal is completed before Congress can ratify it. Mexico will swear in its incoming president, Andrés Manuel López Obrador, on December 1.

A major part of the agreement surrounds import taxes on cars.

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"Unsurprisingly, the Mexican peso gained as did the Canadian dollar too to be fair, and even the euro strengthened as it perhaps signals greater odds of a trade breakthrough between the USA and European Union (although a stronger IFO probably helped too)". Orrin Hatch, the Utah senator who chairs the Finance Committee that would need to approve any deal, said "a final agreement should include Canada".

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