News of this deal comes as the USA economy is seeing record low unemployment and rapid growth.
Mexican President Enrique Pena Nieto appeared to be onboard with the changes.
"It's a tremendous amount of money and it's a very simple negotiation". He also said he would "be terminating the existing [NAFTA] deal very soon" because NAFTA has "a lot of bad connotations" and has been a "bad deal" for the United States.
The new deal requires 75 percent of the value of a vehicle to be produced in the United States or Mexico, up from the NAFTA threshold of 62.5 percent.
Now, Trump can point to this US-Mexico agreement, and the rekindled prospects for a new NAFTA, even if it's unlikely to have a a big impact on American workers and companies. Even if more plants are built in Mexico, jobs will grow in the United States due to high levels of integration, with studies showing that USA parts make up 40 percent of the value of every Mexican-built auto exported to the United States. Crude backed off from that session's highs on fears that economic growth and demand would be stifled as the countries stumbled on negotiating roadblocks.
"If Canada does not join, then getting the agreement of (U.S.) Congress (to the deal) will be trickier", Donovan said.
When the reality show spectacle of Trump's Oval Office phone call with Pena Nieto had subsided, senior USA officials briefed journalists on a conference call.
The U.S. -Mexico NAFTA deal opens the door for Canada to immediately rejoin the talks and is a major step forward in updating the accord.
After mid-level trade talks in Washington last week ended with no agreement, a person familiar with the discussions said that Chinese officials had raised the prospect of suspending talks until after USA congressional elections in November.
On Monday afternoon, perhaps in an attempt to take some of the heat away from the criticism of how he handled the passing of Senator John McCain, President Donald Trump invited the media into the Oval Office for a call between himself and Mexican President Enrique Peña Nieto to announce a new trade deal between the United States and Mexico.
USA stock markets rallied, with the benchmark S&P 500 and the Nasdaq hitting all-time highs, pulling oil prices up.
Technology stocks led the Nasdaq above the 8,000 mark for the first time and the sector provided the biggest boost to the S&P. The index is still roughly 600 points below its all-time high of 26,616.71 set in January. Higher labor standards: The new deal would require that 40% to 45% of auto parts in cars sold be made by workers earning at least $16 United States dollars per hour.
Critics quickly denounced the prospect of cutting Canada out the North American trade pact.
General Motors Co, Ford Motor Co, and Fiat Chrysler Automobiles NV gained between 3.3 percent and 4.8 percent, while Canadian auto parts makers such as Magna International Inc. gained 4.6 percent.
In the last three weeks, since Mr Musk tweeted about privatising the company, its share price has fallen by nearly 15 per cent. Emerging market stocks hit their highest since August 10.
As the final week of reporting season unfolds, Caltex and Blackmore's will report their results today.
On Tuesday, the Journal ripped apart the president's trade deal with Mexico in a scathing op-ed.
It's a preliminary deal between the two countries.