By Lesley Wroughton and Adriana Barrera
MEXICO CITY (Reuters) – Canada and Mexico on Monday pushed back against President Donald Trump’s suggestion that steel and aluminum tariffs could be waived if they signed a new and “fair” NAFTA deal, setting the stage for a tense end to the latest talks to update the trade pact.
The two U.S. trading partners have threatened retaliation unless they are exempted from the planned tariffs, which have rattled financial markets. Both Canada and Mexico send more than 75 percent of their goods exports to the United States.
“Mexico shouldn’t be included in steel & aluminum tariffs. It’s the wrong way to incentivize the creation of a new & modern NAFTA,” Economy Minister Ildefonso Guajardo said on Twitter.
Canadian Finance Minister Bill Morneau, speaking north of Toronto, said Ottawa is now negotiating NAFTA with a partner that has “changed the terms of the discussion,” referring to the United States.
Negotiators from the three countries are scheduled to meet later on Monday in Mexico City to wrap up the latest round of talks aimed at modernizing the 1994 North American Free Trade Agreement.
Trump, who has repeatedly said he will walk away from the trade deal unless major changes are made, had tweeted a few hours earlier that “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”
The U.S. president has proposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, arguing they are needed to protect U.S. industries and jobs. He is expected to reveal more details later this week.
Talks on the $1.2 trillion NAFTA pact are moving slowly, in part because Canada and Mexico are resisting U.S. demands for major changes such as adding a sunset clause and boosting the North American content of autos produced inside NAFTA.
Uncertainty over the talks, and the potential for a wider global trade war, are making investors nervous. Trump’s tweet helped push the Canadian dollar down to C$1.2988 to the U.S. dollar, the lowest level since July 7, 2017.
The Mexican peso was down 0.7 percent at 18.94 pesos per dollar.
The Mexico City round of talks is the seventh since last August. Negotiators had hoped to wrap up their work with an eighth and final session by the end of March, but officials say they will not now meet that deadline.
Guajardo, Canadian Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer – the three ministers driving the talks – are due to meet on Monday to assess what the Mexico round achieved.
Kevin Brady, the Republican chairman of the U.S. House of Representatives Ways and Means Committee, which oversees U.S. trade policy, on Sunday said he expected the tariffs issue “to be front and center” at the meeting.
Freeland, Guajardo and Lighthizer are scheduled to address the media at 2:15 p.m. local time (2015 GMT) in Mexico City.
Officials have so far been evasive when asked how the three nations can continue trying to update NAFTA at a time when Trump is about to take a highly protectionist measure.
Trump also said Canada had to treat American farmers better and called on Mexico to stop drugs “from pouring into the U.S.”
A White House representative did not respond to a request for comment on Trump’s statement.
Mexico’s Foreign Minister Luis Videgaray, in a separate tweet, said efforts to combat drug trafficking were a shared responsibility. Canadian officials did not respond to requests for comment.
NAFTA negotiators have successfully concluded discussions on rules governing food safety and animal health, a Mexican source familiar with the matter said on Monday.
(Additional reporting by David Ljunggren, Dave Graham and Susan Love in Mexico City and Fergal Smith in Toronto; Writing by Lesley Wroughton and David Ljunggren; Editing by Chizu Nomiyama and Paul Simao)