Auto rules in the North American Free Trade Agreement that President Trump wants changed may be altered in the renegotiations among the U.S., Mexico, and Canada, a Mexican official involved in the talks said, indicating that the Trump administration is making some progress on one of its key goals.
"You have to be very prudent on what the level is because you can shoot yourself in the foot,” Mexican Economic Minister Ildefonso Guajardo said on a local news show, according to Reuters. “Let’s put a realistic integration figure that everyone agrees on, it's not going to be the current 62.5 percent ... but it also can’t be 85.”
NAFTA's rules of origin cover the percentage of an automobile's inputs, such as parts and labor, that come from the U.S., Mexico or Canada to have a car be deemed to be "made in America" and qualify for duty-free shipping. Currently, 62.5 percent of a car has to come from a NAFTA country to meet the standard, but the Trump administration wants to increase that to 85 percent and to also require that at least half of the parts be produced in the U.S.
Canada and Mexico have pushed back hard against that proposal, which would hit their economies by severely disrupting the auto industry supply chain, which spans all three countries. Guajardo's comments indicate that Mexico may be willing to give some ground in the hopes of preventing the Trump administration from following through with threats to pull the U.S. completely out of the deal.
In a closed-door meeting with Senate lawmakers Wednesday, U.S. Trade Representative Robert Lighthizer reportedly said the U.S. had made more progress with Mexico in the current renegotiations and may pursue completing those first and then pursuing separate trade talks with Canada, effectively undoing NAFTA.
The same day, Canadian Prime Minister Justin Trudeau said his country would walk away from the talks if necessary. "We will not be pushed into accepting any old deal, and no deal might very well be better for Canada than a bad deal," he said in comments to the University of Chicago's Institute of Politics.
The next round of talks to update the 1993 trade deal are set to begin Feb. 26 in Mexico City and end on March 6.