Trump ups pressure on Canada, Mexico

Donald Trump is using the steel tariffs to pressure Canada and Mexico to agree to a NAFTA deal.
Donald Trump is using the steel tariffs to pressure Canada and Mexico to agree to a NAFTA deal.

Canada and Mexico have pushed back against President Donald Trump's suggestion that steel and aluminium 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 US 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 per cent 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 on Monday.

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 US.

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 modernising 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 US president has proposed a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminium imports, arguing they are needed to protect US industries and jobs. He is expected to reveal more details later this week.

Talks on the $US1.2 trillion ($A1.7 trillion) NAFTA pact are moving slowly, in part because Canada and Mexico are resisting US demands for major changes such as adding a sunset clause and boosting the North American content of cars 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 $C1.2988 to the US dollar, the lowest level since July 7, 2017.

The Mexican peso was down 0.7 per cent at 18.94 pesos per US 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.

Australian Associated Press