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Trump US President tightens screws to reach a NAFTA deal

President Donald Trump is ratcheting up pressure on Canada and Mexico to reach a new trade deal at time when uncertainties about cross-border commerce are weighing on Wall Street.

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Canadian Foreign Minister Chrystia Freeland (L), Mexican Economy Minister Idelfonso Guajardo (C) and US Trade Representative Robert Lighthizer have been engaged in multiple rounds of talks to renegotiate the North American Free Trade Agreement play

Canadian Foreign Minister Chrystia Freeland (L), Mexican Economy Minister Idelfonso Guajardo (C) and US Trade Representative Robert Lighthizer have been engaged in multiple rounds of talks to renegotiate the North American Free Trade Agreement

(AFP/File)

President Donald Trump is ratcheting up pressure on Canada and Mexico to reach a new trade deal at time when uncertainties about cross-border commerce are weighing on Wall Street.

Despite Trump's persistently harsh rhetoric, including renewed threats to exit the North American Free Trade Agreement, senior officials in Ottawa and Mexico City say they are still banking on reaching consensus.

"We've made a lot of progress," Mexican Economy Minister Ildefonso Guajardo told a Mexican radio station on Monday.

"It appears there's a willingness to show flexibility on complex issues."

His remarks followed Trump's Twitter outburst in which he again threatened to exit NAFTA, denouncing Mexican authorities for failing to prevent flows of narcotics and clandestine migration into the United States.

"They must stop the big drug and people flows or I will stop their cash cow, NAFTA," Trump tweeted.

Trump claims NAFTA has destroyed American jobs and promoted offshoring to low-wage destinations.

Guajardo said this month's Summit of the Americas in Peru would offer the chance for heads of state to broach the topic outside of the technical work that remained before an agreement can be reached.

A basic outline for solving complex disagreements could be reached in the next 12 days, he added, although the three sides are still some distance apart.

The political calendars in Mexico and the United States do not favor reaching a quick resolution.

July's presidential elections in Mexico and November's mid-term congressional elections in the United States mean negotiators may have even less room to maneuver.

In Washington, the White House must also contend with market jitters, as Trump's new import tariffs on metals and Chinese-made goods have sent stocks tumbling in recent weeks.

"The recent stock market decline may also be raising pressure on the Trump administration to cut a deal, to demonstrate to the markets that uncertainty over trade is not going to last for many months," Edward Alden, an expert on trade at the Council on Foreign Relations, said in an interview.

Quick deal faces long odds

Several obstacles remain, however, in the talks Trump launched nearly eight months ago to overhaul the 24-year-old NAFTA -- particularly Washington's proposals on rules of origin for the auto manufacturing, an overall "sunset clause" for the agreement and a dispute resolution mechanism.

Under the current agreement, 62.5 percent of the content of a vehicle must be produced within the NAFTA countries to move duty-free across borders.

Washington wants to bump this requirement up to 85 percent, with 50 percent of US origin -- a proposal that Ottawa and Mexico City have rejected.

American officials have not confirmed a Canadian media report that US negotiators have dropped this demand.

Trump's chief trade negotiator, US Trade Representative Robert Lighthizer, is due to meet Guajardo on Wednesday. Lighthizer told CNBC last week he was hopeful of reaching an agreement.

"We continue to favor talks to reach a good outcome for the three countries," the office of Canadian Prime Minister Justin Trudeau told AFP.

However, the odds do not favor a deal any time soon.

"Given the importance and complexity of the issues on the table, and the limited progress made to date, a quick NAFTA deal will be very hard to conclude," CFR's Alden said.

Still, he said the deal reached last week updating a free trade agreement with South Korea showed Trump can be willing "to settle for fairly small changes and call it victory."

"If the same flexibility is shown with NAFTA, then a successful conclusion is possible."

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