Donald Trump has announced that America and Mexico had agreed terms for a new trade deal, moving a step closer to delivering his campaign promise of renegotiating the North American Free Trade Agreement [Nafta].

The US president said he hoped the deal would replace Nafta but declared that he was ditching the old name because it had “bad connotations” for America, which he believes has suffered under the original terms.

Mr Trump challenged Canada - the third signatory to Nafta - to come back to the negotiating table and suggested that the country could be hit with tariffs on its car exports unless it agrees to talk in good faith.

The development is a significant step towards the Trump administration’s ambition to renegotiate Nafta, a 24-year-old trade agreement between America, Canada and Mexico.

However much remains to be achieved, with it unclear if Mexico would sign a deal that did not include Canada. The US Congress also has to approve whatever Mr Trump’s negotiating team is able to secure.