Traders work on the floor of the NYSE in New York
In announcing the "United States-Mexico Trade Agreement", U.S. President Donald Trump declared the current NAFTA dead and threatened Canada with tariffs if it didn't sign on to the revised terms worked out with Mexico.
Trump had been pushing to renegotiate NAFTA since he became president in January 2017, having repeatedly called the trilateral pact - in force since 1994 and encompassing more than $1 trillion in annual trade - a "disaster" for the US.
The United States and Mexico have reached a preliminary agreement resolving key bilateral trade issues.
"(It) is definitely good news for Mexico and the U.S., but could be good or very bad for Canada", Capital Economics Chief U.S. Economist Paul Ashworth wrote in a note to clients on Monday afternoon.
On cars, the two sides also settled on rules that will require 40-45 percent of each vehicle to be made by workers earning at least $US16 an hour.
And there are political reasons to keep Canada inside the regional bloc: "Mexico will have a hard time selling "Trump's deal" back home if Canada does not think it is a good deal", said Daniel Ujczo, a trade attorney with Dickinson Wright PLLC.
Mexican President Enrique Pena Nieto spoke to Trudeau on Monday and urged Ottawa to rapidly rejoin the talks with the goal of getting a final NAFTA rewrite this week. "America's natural gas and oil industry depends on trade to continue to grow U.S.jobs and our economy, and deliver for consumers". "It will either be a tariff on cars, or it will be a negotiated deal", he said.
President Trump aims to move more auto production back to the U.S.
"We will only sign a new NAFTA that is good for Canada and good for the middle class", said Adam Austen, a spokesman for Freeland, adding that "Canada's signature is required".
However Trump has said he could still put tariffs on Canadian made cars if it refuses to agree to the new deal and also wants concessions on the country's dairy products.
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A senior administration official indicated the White House plans to submit a letter to Congress on Friday notifying the legislature of the President's plans to sign a new trade deal, with or without Canada's agreement.
In Mexico, the benefits seem limited, despite an increase in jobs outsourced from the United States.
The upbeat trade outlook was boosted further as European Union officials said Washington was pressuring the EU to speed up tariff talks.
Trump has rejected other multi-national deals, such as the Trans-Pacific Partnership (another trade pact) and the Paris Agreement on climate change mitigation, expressing a strong preference for one-on-one negotiations on trade and other matters with countries.
That requirement could shift some auto parts manufacturing to Mexico from China, a White House official told Reuters, speaking on condition of anonymity.
No, Congress has jurisdiction over trade and has to ratify any new trade agreement inked by the administration.
Trump backed off from an initial United States demand for a "sunset" clause that would kill the pact unless it was renegotiated every five years and which businesses said would stymie long term investment in the region.
None of that stopped Trump from giving the impression on Monday morning that he was "terminating" NAFTA "and going into this deal" with Mexico.
Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, Lighthizer said.
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