US, Mexico Reach New Trade Agreement

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"I read the Art of the Deal", he said.

If Canada does not come to an agreement by Friday, Mr Trump said he will levy additional tariffs on its auto exports.

"We had a NAFTA agreement that had gotten seriously out of whack, that led to large trade deficits and needed updating", Lighthizer said.

"Toyota is pleased to hear that progress is being made by USA and Mexico negotiators to reach a consensus on modernizing NAFTA", the vehicle maker said.

Although Carter said he spoke with Canadian officials on television earlier, all of whom were "very concerned" about the future relationship with the USA and Mexico, he remained optimistic that an agreement could be struck. In February, a 50-minute phone call between Trump and Mexican President Enrique Peña Nieto ended in frustration as the leaders butted heads on the issue. Trump announced that the United States and Mexico have reached a preliminary agreement on trade.

A key element of the US-Mexico talks has been content requirements for autos, which Mexico agreed to increase to 75 percent from North America to get duty free NAFTA treatment.

The political stakes are high for all three countries.

Talks ground to a halt in May, in part due to the July 1 presidential elections in Mexico. But it did not produce a detailed "trade agreement" of the sort Trump was discussing. Trump says, "If they'd like to negotiate fairly, we'll do that".

In order to meet that deadline, the Trump administration must present Congress with a deal at least 90 days in advance - which means the deadline is the end of August.

"And the president did say that if we can not satisfactorily negotiate with [Canada], he may have to go to a large 20-25 percent tax on Canadian automobiles headed for the U.S.", Kudlow said.

Speaking from the White House Monday morning, President Trump announced a reboot of NAFTA after weeks of negotiations with Mexico.

Investors were also cheered by Washington's efforts to press the European Union to speed up trade negotiations.

If talks with Canada are not wrapped up by the end of this week, Trump plans to notify Congress that he has reached a deal with Mexico, but would be open to negotiations with Canada to join the pact, US Trade Representative Robert Lighthizer told reporters on Monday.

"It's an alternative to sunset which we think works", another senior official said.

It contains enforceable labor provisions that require Mexico to adhere to International Labor Organization labor rights standards in an effort to drive Mexican wages higher.

The deal with Mexico centers on rules surrounding the automotive industry.

Trump has repeatedly indicated he would prefer to reach bilateral agreements with Canada and Mexico, but the two countries have maintained a united front that a trilateral agreement is the only one they will sign. While Mexico accepted that change, Canadian officials have said for months that would be unacceptable.

But some economists argue hefty tariffs on cars and other products could lead to a trade war that may only harm a booming United States economy.