The fourth round of talks to renegotiate the North American Free Trade Agreement (NAFTA) began Wednesday in Arlington, Virginia with contentious new U.S. demands threatening to collapse the process as Canadian Prime Minister Justin Trudeau visited U.S. President Donald Trump to promote the trade pact's merits.
The Washington round promises to be difficult, with U.S. Trade Representative Robert Lighthizer announcing early that talks would be extended by two days to October 17.
"It's possible we won't be able to make a deal, and it's possible that we will... we'll see if we can do the kind of changes that we need," Trump told reporters at the White House before a bilateral meeting with Trudeau.
"I think Justin understands this, if we can't make a deal, it will be terminated and that will be fine," he said. Asked whether he would consider separate deals with Canada and Mexico if NAFTA does not work out, Trump responded, "I would. Yes. I would see that."
After the meeting with Trump, Trudeau told reporters that he is optimistic that the three countries can reach a deal to modernize the 23-year-old trade pact, as millions of people benefit from the trade agreement.
Business groups see several U.S. proposals that could result in deadlock, including a sunset clause that would require the trade pact to be renewed in five years, minimum U.S. content in cars, and major changes in dispute-resolution mechanisms.
"There are several poison-pill proposals still on the table that could doom the entire deal," U.S. Chamber of Commerce President Thomas J. Donohue told during a meeting with business leaders in Mexico City. "We've reached a critical moment. And the chamber has had no choice but ring the alarm bells."
The peso was trading in Mexico City around 18.7550 to the U.S. dollar early Wednesday, stronger than the five-month low hit Tuesday but down 5% over the past three weeks.
“The fact that the peso continued to underperform early in the week, while the rest of emerging-market [currency] rebounded suggests that markets are preparing for the possibility of an adverse outcome from this round of negotiations,” said in a note Credit Suisse FX strategist Alvise Marino.