Canada and U.S. Reach Tentative Agreement on Replacement for NAFTA

With only hours to spare from a U.S.-set deadline to complete it by September 30, Canada and the U.S. have reached agreement on the core terms for their part of the NAFTA renegotiation.

Canadian Prime Minister Justin Trudeau and Donald Trump, shown during a visit at the White House in February 2017.

Although most details of the agreement have not yet been released, those close to the agreement negotiations say both sides gave in somewhat on what had been hard demands at the start.

When the final agreement is detailed and signed off by both parties, the U.S. will be given far greater access to the Canadian dairy market than previously. Canada currently charges tariffs on dairy imports of as high as 300 percent over agreed-upon quotas. The concessions will allow raising the quotas substantially, sources said.

The U.S. also agreed to leave in the important investor dispute resolution system that the American side hated but Canada said was mandatory in any final treaty.

Surprisingly, there was no agreement in the proposed deal for the U.S. to drop its tariffs on steel and aluminum coming from Canada. Further, while there will be no absolute limit on the number of Canadian-built cars shipping into the U.S., there is apparently nothing in the agreement that would protect Canada should the U.S. – at a later date -- impose “section 232” tariffs on autos imported into the U.S. Considering that Canada currently exports more than $56 billion of cars and auto parts into the U.S., that does put a lot of revenue and over 120,000 Canadian jobs at higher risk than expected in this iteration.

Canadian Prime Minister Justin Trudeau has so far not issued any statements on the agreement, other than that one had been reached. He did tell those outside where he had been in a late-night Cabinet meeting that it was “a good day for Canada”, but would hold other comments until Monday morning.