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The U.S. push to finish NAFTA talks comes at the same time it’s in a spiralling trade war with China, and has threatened to place tariffs on cars imported from major manufacturing centres in Asia and Europe — efforts that have created new uncertainty for many businesses and investors.

Talks between the U.S. and Mexico had focused largely on cars. The U.S. wanted to bring back auto manufacturing jobs that had gone to Mexico. The countries are said to have agreed that automakers who don’t comply with the new NAFTA rules will pay a 2.5 per cent tariff, the same as they would if they skirted the existing NAFTA, while any new Mexican plants wouldn’t have a guarantee. That could potentially expose them to U.S. auto tariffs of between 20 per cent and 25 per cent, which Trump is considering under national security grounds. The new rules would also likely require key components to have more domestic content.

Jesus Seade, the NAFTA representative for Mexican president-elect Andres Manuel Lopez Obrador, has predicted that the nations will agree on a softened version of a so-called “sunset clause,” an automatic expiration after five years — a key U.S. demand. The recent push for a deal is in part to have it signed before the new president takes office in December.

That would be essential, as the sunset clause was a major sticking point — erupting, for instance, at the Group of Seven summit. Other key issues are Chapter 19 anti-dumping panels, which the U.S. wants to kill but which may be a deal-breaker for Canada, as well as Canada’s dairy sector, which Trump is targeting.

How quickly Canada will rejoin talks remains unclear. Canada’s minister responsible for Nafta, Chrystia Freeland, is in Europe this week. Even once Canada agrees, any NAFTA deal between the three countries would have to be ratified. Timelines set out under U.S. trade law mean that would almost certainly be done by the next U.S. Congress, raising the prospect of further hurdles.

–With assistance from Mark Niquette.

Bloomberg.com