scorecardThe US and Canada are reportedly closing in on a NAFTA deal as a critical deadline looms
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The US and Canada are reportedly closing in on a NAFTA deal as a critical deadline looms

The US and Canada are reportedly closing in on a NAFTA deal as a critical deadline looms
Stock Market5 min read

trump trudeau

Leon Neal/Getty Images

Donald Trump and Justin Trudeau

  • The Trump administration set a deadline of Sunday for Canada to agree to a revised version of the North American Free Trade Agreement.
  • To step up the pressure, President Donald Trump and US officials threatened to leave Canada behind and sign a bilateral deal with Mexico unless the Canadians agree to a deal by the deadline.
  • The pressure appears to be working as reports indicate the two sides are closing in on a deal.
  • But there are still several issues outstanding, including dairy tariffs and trade-dispute resolution.

The US and Canada are reportedly working furiously to reach a deal over revisions to the North American Free Trade Agreement (NAFTA).

According to multiple reports, the two countries are closing in on an agreement to update the two decade-old trilateral trade deal and an announcement could come as soon as Saturday.

The intense negotiations come hours before the Trump administration's Sunday deadline for Canada to sign on to a new bilateral trade deal between the US and Mexico. Absent an agreement, the administration threatened the two countries will move forward without their northern neighbor.

This also represents a major turnaround from earlier in the week when Trump hurled insults at his Canadian counterparts during a press conference, prompting a strong reply from Prime Minister Justin Trudeau.

While no deal is guaranteed, the two sides appear to be closing in on the the NAFTA rewrite.

Pressure to get a deal done

The US-imposed deadline was designed to secure a deal before Mexican President Enrique Peña Nieto leaves office on December 1. The law under which the US is renegotiating NAFTA requires Trump to notify Congress 60 days before a signature, so Sunday appeared to be the last day to get Canada into the deal to ensure Nieto can sign the agreement.

The Trump administration is hoping to avoid the possible reopening of negotiations by Nieto's successor, Andrés Manuel López Obrador, which could add more political uncertainty.

Early signs that progress was being made came Friday when the release of the US-Mexico bilateral trade deal's official text was pushed back with little explanation. Mexican Economy Minister Ildefonso Guajardo told reporters after announcing the delay that the US and Canada were attempting to reach an agreement in the short-term.

"At this moment there's a very serious attempt to continue advancing in the process of finalizing the differences in bilateral issues between the U.S. and Canada," Guajardo said.

Rumblings that progress was being made grew louder when Chrystia Freeland, Canada's minister of foreign affairs and the country's chief negotiator in the NAFTA talks, pushed back a planned speech at the United Nations on Saturday in order to continue talks.

Freeland, as well as other key Canadian officials, returned to the capital of Ottawa on Saturday to make progress on negotiations.

US threatened to move on without Canada

The growing possibility of a deal comes after Trump's team attempted to put pressure on Canada with threats to move forward with the bilateral US-Mexico deal.

"I think Canada wants to do it, I know we want to do it," US Trade Representative Robert Lighthizer said Tuesday. "We'll see whether it happens, we're sort of running out of time."

Despite the threats, Canadian officials did not appear ready to make concessions - and the country received the support of some notable allies.

Mexico is not committed to moving forward with the US on an exclusively bilateral basis and incoming president López Obrador told reporters on Friday that his administration would push Trump to maintain the trilateral nature of NAFTA.

Also bolstering Canada's position are US lawmakers in both parties. Both Republicans and Democrats have stressed that a bilateral deal between the US and Mexico will likely not get the votes needed to ratify the agreement and Canada should stay in the deal.

A turnaround from Trump's attacks

The possible deal also comes as a surprise given earlier pessimism that an agreement could be reached before the deadline and the barbs traded between Trump and Trudeau earlier in the week.

When asked about the state of NAFTA negotiations with Canada, Trump told reporters at a press conference Wednesday that he rejected a request for a meeting from Canadian Prime Minister Justin Trudeau.

"Because his tariffs are too high, he doesn't seem to want to move and I've told him forget about it," Trump said when asked why he turned Trudeau down. "And frankly we're thinking about just taxing cars coming in from Canada, that's the mother load, that's the big one. We're very unhappy with the negotiations and the negotiating style of Canada."

Trudeau's office told Business Insider that they made no request for a meeting.

Trump also took a shot at Chrystia Freeland, Canada's minister of foreign affairs and the country's chief negotiator in the NAFTA talks.

"We're very unhappy with the negotiations and the negotiating style of Canada. We don't like their representative very much," Trump said.

Trudeau pushed back on Trump's comments about Freeland and the state of negotiations on Thursday.

"The Americans are finding that negotiations are tough because Canadians are tough negotiators, as we should be," Trudeau told reporters. "A good and fair deal is still possible, but we won't sign a deal that is bad for Canadians."

Several outstanding issues

Even in the face of the Trump administration's pressure, Canada seemed to be sticking strong on a handful of thorny issues and its unclear where the two sides have come out on these problems.

According Canadian and US officials over the past few weeks, the biggest issues going into the talks were:

  1. Canada's dairy protections: A particular sore spot for Trump, the US is demanding that Canada give American dairy farmers more access to its market. Canada wants to keep the protections in part due to the political influence of its country's farmers.
  2. Trade protection: Another major sticking point is Canada's desire to keep Chapter 19 of the NAFTA deal, which created an extrajudicial dispute resolution process that allows member countries to contest particular trade policies of other members. In fact, Trudeau suggested that Canada needs Chapter 19 to protect itself against Trump's volatile behavior.
  3. Auto tariffs: According to reports, Canada is also seeking assurances that Trump will not impose tariffs on imports of cars and auto parts from the country as the president has threatened.