Mexico, Canada dismiss Trump threats to scrap NAFTA

Mexico City/Ottawa | Reuters — Mexico and Canada on Wednesday dismissed U.S. President Donald Trump’s threat to scrap NAFTA, describing it as a negotiating tactic designed to gain an advantage during talks to update one of the world’s biggest trading blocs.

In comments that initially pushed Mexico’s peso currency down by more than one per cent, Trump on Tuesday reiterated his threats to terminate the North American Free Trade Agreement. Trump has long called the 1994 treaty a bad deal that hurt American workers, saying it should be re-negotiated or ended.

Initial talks between Mexico, the U.S. and Canada to update NAFTA ended in Washington over the weekend with no sign of a breakthrough, and further discussions are due in Mexico City in September.

Trump’s top trade official, Robert Lighthizer, underscored the NAFTA termination threat on Wednesday, saying the U.S. was seeking “substantial changes to address its fundamental failures.”

“President Trump has been clear from the very beginning that if the NAFTA renegotiation is unsuccessful, he will withdraw from the agreement,” Lighthizer said in a statement issued by the Office of the United States Trade Representative.

Mexican Foreign Minister Luis Videgaray sought to brush off Trump’s threat, saying his remarks were simply a tactic and Mexico would keep negotiating. The comments were not a surprise, nor would they scare Mexico, he added.

“He’s negotiating in his own particular style,” he told local television.

Mexican Economy Minister Ildefonso Guajardo added in a statement that Mexico has a “Plan B very clearly defined” in case NAFTA talks fail, but declined to provide details.

Canadian Prime Minister Justin Trudeau, speaking to reporters in Montreal, said his officials would “stay focused on the hard work we have ahead of us at the negotiating table… I don’t see anything changing in that.”

He did not directly refer to Trump’s remarks.

The peso later recovered all its losses. NAFTA’s fate is important to Mexico and Canada, which both send most of their exports to the U.S.

A Canadian official said Ottawa would not be deterred by Trump’s threat, given the government had been bracing for moments of turbulence.

“This was always a card we knew the president would likely play… it may have been a bit earlier than expected,” said the official, who declined to be identified given the sensitivity of the situation.

“It’s not going to cause us to waver at all in our position… (we) won’t really be deterred by these statements,” the official added.

Separately, the office of Foreign Minister Chrystia Freeland issued a statement saying Canada would work hard to modernize NAFTA and noted trade talks often had moments of heated rhetoric.

Mexico’s currency fell to record lows following Trump’s victory in the U.S. presidential election last November, with investors scared he could hurt Mexican exports and cause a recession south of the border.

However, the peso has recovered since then, as many of investors’ worst fears seemed to subside.

In recent months, peso traders increasingly appeared to pay little heed to some of Trump’s comments, helping a recovery in the currency.

But Trump’s remarks showed traders remain skittish about the future of NAFTA, and highlighted the complexity of the talks.

Reporting for Reuters by Gabriel Stargardter in Mexico City and David Ljunggren in Ottawa. Additional reporting for Reuters by Veronica Gomez in Mexico City.

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