TORONTO- U.S. President Donald Trump said on Saturday he would soon give formal notice to the U.S. Congress to terminate the North American Free Trade Agreement (NAFTA), giving lawmakers six months to approve a new trade deal between the United States, Mexico and Canada to replace it.
Trump said that if U.S. lawmakers don't approve the new agreement, then the three countries would revert to the rules of trade that existed before NAFTA came into effect in 1994.
It is unclear if Trump has the legal power to terminate NAFTA in the way he has threatened. The opposition Democratic party will soon have a majority in the lower house of Congress and has said it wants changes to the new trade deal, known as the USMCA.
Trump's threat raised fears that trade flows across North America could be disrupted if Congress fails to agree on the new deal before NAFTA expires.
WITH CANADA, TARIFF UNCERTAINTY
Under the 1987 Canada-United States Free Trade Agreement, the two countries agreed to phase out most tariffs, a process that accelerated under NAFTA. The deal excluded dairy, poultry, eggs and sugar, but virtually all other tariffs were phased out by 2008. That means terminating NAFTA could have a limited impact on the movement of goods between the two countries.
But some trade experts have argued that because the agreement was formally suspended when NAFTA went into effect, both governments would have to take steps to put it back into force. If the old deal is not reinstated, a vast array of goods made in the United States and Canada would be subject to tariffs and cost more.