MEXICO CITY: Canada and Mexico will rebuff the United States over its demand for tougher NAFTA automotive content rules, top officials said on Monday as negotiations to renew the treaty bogged down with only a few months to go.

U.S. President Donald Trump is threatening to quit NAFTA, which has reshaped the continent’s auto sector over the past 23 years, unless major changes can be made to return manufacturing jobs to the United States.

Canadian and Mexican negotiators will address the U.S. auto demands on Tuesday, the final day of the fifth round of talks to update the North American Free Trade Agreement, chief Mexican negotiator Ken Smith told reporters.

Although the talks are due to wrap up in March 2018 after a seventh and final round, they are deadlocked over a series of hard-line proposals the United States unveiled at the fourth round last month.

“It’s definitely slowed down from the previous round,” said a Canadian source with direct knowledge of the talks. “There has been no progress in the contentious chapters.”

Canadian and Mexican officials have complained repeatedly about what they see as U.S. inflexibility. A spokeswoman for the U.S. Trade Representative declined to comment.

Negotiators say they need to finish their work before campaigning for Mexico’s presidential election formally begins at the end of March.

The campaign team for the leftist former mayor of Mexico City and early front-runner, Andres Manuel Lopez Obrador, on Monday repeated calls for the NAFTA talks to be postponed until after the July presidential vote.

The Canadian source said the sixth round would be held in Montreal at the end of January 2018.

Mexico and Canada fear Trump will follow through on a promise to pull out of NAFTA, causing disruption and economic damage. The Canadian dollar edged lower against its U.S. counterpart on Monday, in part because of concerns about the negotiations.

Alarmed U.S. politicians and industry groups have started to put concerted pressure on the White House not to take drastic moves they say would cause job losses.

“Support for NAFTA from the American private sector, and also members of Congress, and even Republican governors, is starting to get very vocal, which we view very positively,” said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby.

Jeff Leal, farm minister for the powerful Canadian province of Ontario, said in an interview he believed the increasingly vocal U.S. protests would help those who wanted to keep NAFTA.

FRICTION OVER AUTO CONTENT STANDARDS

Canada and Mexico are particularly unhappy about the U.S. push for tougher autos content. Vehicles and auto parts account for most of the US$64 billion U.S. trade deficit with Mexico, a sore spot for Trump.

The Trump administration wants half of the content of all North American-built autos be produced in the United States and that the regional vehicle content requirement be increased to 85 percent from 62.5 percent.

Canada and Mexico dismiss the idea as unworkable and plan to respond with presentations on how such a move would damage the North American auto industry, people briefed on the talks said.

A Mexican auto industry representative with knowledge of the talks called the U.S. proposal “insane” on Sunday.

“There is no product made in North America that meets this rule of origin requirement,” said Matt Blunt, president of the American Automotive Policy Council, which represents Ford Motor Co , General Motors Co and Fiat Chrysler.

In San Antonio, Texas, a senior U.S. official told a Senate panel that the administration wanted to rebalance the large automotive trade deficit with Mexico.

U.S. business groups are pinballing between despair and panic as negotiations over a new North American Free Trade Agreement resume, with the Trump administration’s hard-line demands risking a worsening standoff and perhaps the eventual collapse of the talks.

Corporate concerns were only inflamed by President Trump’s Asia trip, which showcased his “America First” trade policy and left the United States isolated as 11 other nations agreed to new trade liberalization measures.

On the eve of this week’s NAFTA talks, the fifth of seven scheduled rounds, the uncompromising U.S. stance now risks scuppering a 23-year-old treaty that helped knit together a colossal continental economy, business groups said.

“Everybody I talk to is very gloomy,” said Bill Reinsch, a distinguished fellow with the Stimson Center and a former head of the National Foreign Trade Council. “People are expecting very little out of this round.”

In a belated mobilization to save the deal, the U.S. Chamber of Commerce in recent weeks flooded Capitol Hill with executives from companies that stand to lose lucrative trade preferences if Trump fulfills his threat to withdraw from the treaty.

The Trade Leadership Coalition, a separate industry-funded group headed by a former Caterpillar lobbyist, last week began airing pro-NAFTA advertisements in nine states that Trump won in 2016.

The 60-second television ads — running in Texas, Tennessee, Nebraska, South Dakota, Mississippi, Michigan, Ohio, Iowa and Indiana — highlight economic gains in manufacturing and agriculture before concluding: “The United States is stronger than ever before . . . NAFTA works, but President Trump is threatening to withdraw from NAFTA.”

The conjunction of the NAFTA talks in Mexico City this week and the president’s return from his five-nation Asia swing have underscored Trump’s continued difficulty translating his populist trade instincts into tangible achievements.

The last NAFTA round, in Washington, ended on a sour notewith Mexico, Canada and U.S. business groups expressing alarm over several U.S. proposals.

“NAFTA is in a very difficult place because the U.S. has put a series of demands on the table that are unlike demands that have been seen in any other trade agreement,” said Robert Holleyman, deputy U.S. trade representative under President Barack Obama. “Canada and Mexico are completely unclear about how to respond.”

LONDON — BP helped Mexico execute its 2018 oil hedge, the biggest in the industry, becoming the second major after Shell to participate in the highly coveted programme and challenging the traditional role of banks in the operation.

Three industry sources said BP has become a participant of the 2018 programme on which Mexico spent some $1.26 billion (£959.5 million) to hedge its 2018 oil exports against oil price falls as part of government’s efforts to stabilise its budget.

BP declined to comment.

BP joins rival Royal Dutch Shell, which made a first foray last year to become the first major to challenge years of dominance of big Wall Street banks in the programme.

Shell declined to comment.

Banks such as Goldman Sachs, Citi and JPMorgan have dominated Mexico’s programme for years but their role has diminished with tighter regulations on bank commodity trading, including a near total ban on proprietary trading.

Commodities-related revenue across Wall Street banks broadly tumbled in the first half of 2017 to its lowest level since at least 2006, consultancy Coalition said in a report.

This was due mainly to a drop in client activity and a slump in trading performance in the energy sector.

Mexico did not disclose the volumes of oil hedged nor detail of the average price per barrel of put options that the government has purchased.

In September, the finance ministry proposed a 2018 budget that based expected oil export revenue on an estimate of $46 per barrel. In October, members of Congress increased that estimate to $48.5 per barrel as global oil prices rose.

On Tuesday, Brent oil prices stood at $64 per barrel [O/R]

For more than a decade, Mexico’s government has paid for a hedge every year in a bid to guarantee its revenues from oil exports by state company Pemex. The programme is seen as the world’s top sovereign derivatives trade.

Last year, the government bought put options at an average price of $38 per barrel to cover 250 million barrels of crude at a cost of $1.03 billion and underpin the 2017 budget, which was based on an average price of $42 per barrel.

This year, Mexico is on track to not see any income from its oil hedge as prices for Mexican crude trade well above $50 per barrel. In 2016, Mexico saw a $2.65 billion payout from its oil hedge.

Mexico used to receive about one-third of federal revenues from oil sales, but it now funds less than one-fifth of the budget with oil sales after the collapse of crude prices in late 2014 and a decline in production.

Talks to renegotiate NAFTA have stalled, and for those in favor of the United States’ continued participation in the U.S.-Mexico-Canada trade agreement, maybe that’s a good thing.

Antonio Garza, former U.S ambassador to Mexico and now counsel to White & Case law firm in Mexico City, said the negotiating parties have pressed the pause button after four rounds of negotiations in which the United States has insisted on changes the other countries consider nonstarters.

These “poison pill” proposals include a sunset clause that would let the North American Free Trade Agreement expire in five years unless all three countries vote to continue it, a move U.S. business leaders argue would torpedo companies’ ability to make long-term foreign-investment decisions.

Critics inside the industry argue that such “rules of origin” restrictions probably would compel automakers to move production out of the United States, then pay a tariff to import their own products — essentially a tax on the industry that would decrease its global competitiveness.

Garza said the U.S. agricultural industry also fears a withdrawal from NAFTA since Canada and Mexico are huge markets for U.S. agriculture exports. Texas is the largest U.S. exporter of agricultural products to Mexico, with more than $3.7 billion worth exported in 2016.

An Oct. 25 letter to U.S. Commerce Secretary Wilbur Ross signed by 87 food and agricultural organizations spelled out the impact of pulling out of NAFTA, including the loss of 50,000 jobs in food and agriculture and a $13 billion decrease in gross domestic product in the farm sector alone.

The letter also disputed Ross’ assertion that the predicted blow to U.S. agriculture from a NAFTA pullout constitutes an “empty threat.” Garza, who writes regularly about U.S.-Mexico relations, wrote recently that after four rounds of talks among the three countries, “the hopes of bringing the 25-year-old agreement into the 21st century are looking increasingly slim.”

“I’m not terribly encouraged right now,” he said. “I’m glad to see the parties have taken a pause. This pause can act as a bit of a cooling period.”

The fifth round of negotiations is scheduled to start Nov. 17. Before that date, the U.S. private sector — including the energy sector — needs to step up and convincingly make the case for America’s continued involvement in NAFTA, Garza said.

“If a broad coalition of U.S. interests don’t step up aggressively and set the table for ‘18, then I think it’s going to be tough to get an agreement,” he said. “It’s got to come from the U.S. private sector.”

On Oct. 24, according to the New York Times, more than 130 representatives from an array of industries met with lawmakers on Capitol Hill to try to preclude a pullout. Historically, Republicans and pro-trade groups like the U.S. Chamber of Commerce see eye-to-eye — not so with President Donald Trump, who has labeled the trade pact the “worst deal ever” for the United States.

“Essentially, the administration has made their sole metric of success the reduction of (trade) deficit, but trade agreements are a lot more than a single metric,” Garza said. “It’s like flying a plane and looking at only one gauge on your dashboard.”

Most economists and trade analysts agree that NAFTA should be updated, but also tout the agreement’s positives, including higher U.S. exports, lower prices for consumers and the 14 million jobs NAFTA supports, he said. Recent surveys show Americans strongly support trade, Garza said.

If Trump does pull out of NAFTA, Texas and the Rio GrandeValley have plenty to lose, Garza said, citing the fact that the state trades $178 billion worth of goods per year with Mexico, more than the United States trades with any single European country.

Texas exports $92 billion per year to Mexico, which constitutes nearly 40 percent of all the state’s international exports, with computers and electronics, transportation equipment and petroleum products accounting for the lion’s share.

“The single biggest beneficiary in terms of trade with Mexico has been Texas and the border, not only in terms of economic impact,” Garza said. “It would have a detrimental impact, more generally, on the nature of the relationship and cooperation we have with Mexico on issues as disparate as immigration, counternarcotics efforts and counterterrorism efforts.

“We talk about NAFTA as an economic platform and that’s true, but the relation we enjoy with Mexico is far broader than simply economic,” he said. “No doubt we’d feel it on trade first, but I think we’d start to feel it in our relationship generally.”

President Trump has called the North American Free Trade Agreement “the worst deal ever,” but one thing might actually be worse: no deal at all.

The fourth round of negotiations to revise the agreement wraps up Oct. 17, but many people close to the talks have expressed doubts that they will succeed.

If NAFTA crumbles, trade among Mexico, Canada and the United States would fall under World Trade Organization rules with modest average tariff rates and an established, if unwieldy, process for resolving disputes.

But the tariff rates, although relatively low, would be higher on U.S. exports than on U.S. imports. Many trade experts say that would hurt U.S. exporters of everything from corn to auto parts and that the United States could end up with fewer jobs while paying higher prices for goods than it does.

Meanwhile, Canada and Mexico would be able to fall back on free-trade agreements they have forged with Europe recently, providing zero tariffs.

Mexican Foreign Minister Luis Videgaray told a Mexican Senate committee this week that the end of the North American Free Trade Agreement “won’t be the end of the world.”

And in some ways Videgaray is right. The world of global trade has far fewer walls and stumbling blocks than it did 23 years ago, when NAFTA went into ­effect.

Nonetheless, even small tariff differences can have substantial effects, many trade experts say, and could upend established supply chains.

“If NAFTA ends, the tariffs the United States imposes on imports from Mexico would revert (from currently zero) to their WTO levels. For the United States, these tariffs average 3.5 percent” across all goods, Chad Bown, a senior fellow at the Peterson Institute for International Economics, said in an email.

“Mexico’s WTO tariffs are a bit higher — on average 7.1 percent,” he wrote. “So U.S. exporters would go from facing zero tariffs currently for their sales to the Mexican market under NAFTA to 7.1 percent on average without NAFTA.”

For automobiles, the gap could add hundreds of dollars to the price of a car. Or carmakers in Mexico might drop U.S. suppliers subject to WTO rates and look for European auto parts manufacturers, who would not have to pay any tariff under their free-trade pact.

NAFTA’s rules of origin for automobiles would also disappear. Those rules were designed to prevent countries outside North America from using the treaty as a back door into the U.S. market. Under NAFTA, 62.5 percent of the value of an imported vehicle must originate in Canada, Mexico or the United States for that vehicle to get duty-free access to the region.

Without NAFTA, supply chains could reorient themselves. Cars sold in the United States might contain more foreign parts, and Mexican cars sold to Europe or Latin America might use fewer U.S. components.

“U.S. producers would face less market access in Mexico without NAFTA than Mexico would face in the United States,” said Caroline Freund, a senior fellow at the Peterson Institute for International Economics and former economist at the World Bank.

Getting rid of NAFTA could also hurt the agriculture industry, which is strong in the states Trump carried in his presidential campaign. Since NAFTA was enacted, U.S. food and agricultural exports to Canada and Mexico have more than quadrupled, to $38 billion in 2016, according to the Fresh Produce Association of the Americas. And Mexican agricultural exports have given consumers year-round access to fruits and vegetables that had been available only during certain seasons.

A collapse of NAFTA could also boomerang on some of the accord’s harshest critics, especially labor and environmental groups that want to toughen up what they see as ineffective side agreements to the original treaty. Without NAFTA, however, those agreements would simply vanish.

Leo Gerard, president of the United Steelworkers union, says NAFTA was sold to the American public with “a bag full of lies.” He says it has done little to bring good wages to Mexico and has therefore siphoned jobs to Mexico away from the United States and Canada. He singles out auto factory jobs; half his members make auto parts.

But Gerard isn’t ready to simply shred the NAFTA agreement. He wants to fix it with enforceable labor standards and wages.

“If you just rip it up, it’s worse,” he said. “If you bail out of this, you’re going to have to have new rules.

”Mexico, however, would not escape damage from a collapse of NAFTA. NAFTA has helped generate confidence in all three nations, which has been especially helpful in attracting investment to Mexico. A collapse of the accord could choke off some of that investment.

Moreover, the WTO tariff numbers are averages and in some areas — especially in agriculture, sneakers and textiles — the United States could impose much higher duties. It would impose a 25 percent tariff on pickup trucks, 48 percent on sports sneakers, and between 5 and 20 percent for textiles, Freund said.

Even with the free-trade agreements Mexico has with Europe and others, it will be hard- pressed to divert goods from the United States, where Mexico sends 80 percent of its exports.

In a roundabout way, the collapse of NAFTA could help Mexico sell those goods. The end of the agreement probably would undermine confidence in Mexico’s currency, the peso, which has declined nearly 6.5 percent over the past month amid squabbling over trade. That could further lower costs of manufacturing in Mexico, making it even harder for the United States to compete with its southern neighbor.

The impact a NAFTA collapse would have on U.S.-Canada trade is less clear. Before NAFTA, the two nations had a bilateral free-trade agreement that might come back into force after ­NAFTA. If so, each country would have zero tariffs on the other. If that treaty were not brought back into effect, then Canada could impose an average tariff of 4.2 percent on U.S. goods under the WTO rules.

WASHINGTON — The North American Free Trade Agreement, long disparaged by President Trump as bad for the United States, was edging closer toward collapse as negotiators gathered for a fourth round of contentious talks here this week.

In recent weeks, the Trump administration has sparred with American businesses that support Nafta and has pushed for significant changes that negotiators from Mexico and Canada say are nonstarters. All the while, the president has continued threatening to withdraw the United States from the trade agreement, which he has maligned as the worst in history.

As the trade talks began on Wednesday, Mr. Trump, seated in the Oval Office beside Prime Minister Justin Trudeau of Canada, said it was “possible” that the United States would drop out of Nafta.

“It’s possible we won’t be able to make a deal, and it’s possible that we will,” the president said. “We’ll see if we can do the kind of changes that we need. We have to protect our workers. And in all fairness, the prime minister wants to protect Canada and his people also. So we’ll see what happens with Nafta, but I’ve been opposed to Nafta for a long time, in terms of the fairness of Nafta.”

Mr. Trudeau, in comments later at the Canadian Embassy, said he remains optimistic about the potential for a Nafta deal but noted that Canadians must be “ready for anything.”

The collapse of the 1994 trade deal would reverberate throughout the global economy, inflicting damage far beyond Mexico, Canada and the United States and affecting industries as varied as manufacturing, agriculture and energy. It would also sow at least short-term chaos for businesses like the auto industry that have arranged their North American supply chains around the deal’s terms.

The ripple effects could also impede other aspects of the president’s agenda, for example, by solidifying political opposition among farm state Republicans who support the pact and jeopardizing legislative priorities like tax reform. And it could have far-reaching political effects, including the Mexican general election in July 2018 and Mr. Trump’s own re-election campaign.

Business leaders have become spooked by the increasing odds of the trade deal’s demise, and on Monday, more than 310 state and local chambers of commerce sent a letter to the administration urging the United States to remain in Nafta. Speaking in Mexico on Tuesday, the president of the U.S. Chamber of Commerce, Thomas J. Donohue, said the negotiations had “reached a critical moment. And the chamber has had no choice but ring the alarm bells.”

“Let me be forceful and direct,” he said. “There are several poison pill proposals still on the table that could doom the entire deal.”

The potential demise of the trade deal prompted supportive messages from labor unions, including the A.F.L.-C.I.O. and the United Steelworkers, as well as some Democrats.

“Any trade proposal that makes multinational corporations nervous is a good sign that it’s moving in the right direction for workers,” said Senator Sherrod Brown, Democrat of Ohio.

If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.

For months, some of the most powerful business leaders in the country, and the lobbies and political figures that represent them, had hoped that the president’s strong wording was more a negotiating tactic than a real threat and that he would ultimately go along with their agenda of modernization. Nafta is nearly a quarter-century old, and people across the political spectrum say it should be updated for the 21st century while preserving the open trading system that has linked the North American economy.

The pact has allowed industries to reorganize their supply chains around the continent to take advantage of the three countries’ differing resources and strengths, lifting the continent’s economies and more than tripling America’s trade with Canada and Mexico since its inception. Economists contend that many workers have benefited from these changes in the form of higher wages and employment, but many workers have lost their jobs as manufacturing plants relocated to Mexico or Canada, making Nafta a target of labor unions, many Democrats and a few industries.

But most business leaders had hoped that the president, whose Nafta criticism has been unrelenting, would be content to oversee tweaks to modernize the agreement, and then call it a political transformation.

It sometimes looked as if that might be the case. The appointment of Robert Lighthizer as United States trade representative, who pledged in his confirmation hearing to “do no harm” to Nafta, reassured many on Capitol Hill, where Mr. Lighthizer had long served in aide roles. And when the administration released its negotiating goals in July for the deal, they echoed many priorities of previous administrations.

But now, eight weeks into trade talks that were originally supposed to conclude by year’s end, the administration continues to push for concessions that the business community warns would essentially undermine the pact, and which few observers believe Canada and Mexico could agree to politically.

“Everyone knows that much of what is being proposed in key areas are, in effect, non-starters, which begs the question as to what, exactly, the administration is trying to achieve,” Michael Camuñez, a former assistant secretary of commerce under President Barack Obama, wrote in an email. It’s not unreasonable to think that by accommodating the president’s most extreme positions, American negotiators are “simply giving Trump cover to do what he really wants: withdraw from the agreement,” he said.

Phil Levy, a trade adviser for the George W. Bush administration, said the president was most likely looking for a pretext to kill Nafta.

“Find me the last trade agreement that U.S. passed with the chamber in opposition,” Mr. Levy said. “You don’t have a chance. It’s hard enough with the U.S. Chamber in favor.”

The most controversial of the administration’s proposals, floated by Commerce Secretary Wilbur Ross, would incorporate a sunset clause in the deal, causing Nafta to automatically expire unless all three countries voted periodically to continue it. That provision has drawn swift condemnation from the chamber and other industry groups like the National Association of Manufacturers, which say that it would instill so much uncertainty in the future of Nafta that it would basically nullify the trade agreement.

Another contentious push by the United States centers on changing Nafta’s rules governing how much of a product needs to be made in North America in order to enjoy tariff-free trade between the countries. The United States is pushing for higher levels, including a requirement to make 85 percent of the value of automobiles and auto parts in North America, up from 62.5 percent currently, and an additional requirement for 50 percent of the value to come from the United States.

That has pitted some of the world’s biggest auto companies against the Trump administration. Industry representatives say such high and complex barriers could deter companies from manufacturing in the United States altogether.

The administration has also proposed limits on the number of federal government contracts that Mexican and Canadian companies can win, as well as significant changes to how disputes are resolved under Nafta.

Business groups say they are firmly opposed to an American push to curtail a provision called investor-state dispute settlement, which allows companies to sue Canada, Mexico and the United States for unfair treatment under Nafta. Meanwhile, Canada has said that it will not consider dispensing with another provision, Nafta’s Chapter 19, which allows countries to challenge each other’s anti-dumping and countervailing duty decisions before an independent panel.

In his remarks Tuesday, Mr. Donohue called the administration’s proposed changes to these provisions “unnecessary and unacceptable.”

Mr. Donohue’s remarks followed a sharp exchange of words between the Chamber of Commerce, the country’s most powerful business lobby, and the Trump administration on Friday.

John Murphy, senior vice president of international policy for the chamber, said the administration’s proposals had “no identifiable constituency backing them” and had sparked “a remarkable degree of unity in their rejection.” He added that business leaders had perhaps never been at odds with an administration over a trade negotiation on so many fronts.

Hours later, the administration fired back.

“The president has been clear that Nafta has been a disaster for many Americans, and achieving his objectives requires substantial change,” said Emily Davis, a spokeswoman for the trade representative. “These changes of course will be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”

Mr. Trump is known for taking a tough negotiating stance, and analysts said the administration might view its ambitious opening requests as a way to gain more leverage in the Nafta negotiations.

But Mr. Murphy and others in the business community cautioned that such an approach would probably be ill-fated. In both Canada and Mexico, Mr. Trump is unpopular, and caving to his demands could have devastating consequences for local politicians. Mexican government officials have repeatedly said they would not negotiate with a gun to the head.

“There’s an old adage in negotiations, never take a hostage you wouldn’t shoot,” Mr. Murphy said.

As nearly 700 officials gather this week to discuss overhauling the free-trade agreement between the United States, Mexico and Canada, participants and analysts say the negotiations are at an increasing risk of failure.

President Donald Trump’s Twitter bombs and rhetorical attacks on what he calls the “worst deal ever made” and his administration’s vague and confusing proposals have dismayed Canada, which is now exploring backup options. And they have infuriated Mexico ahead of a presidential election in which voters are demanding that their leaders stand up to the United States.

If officials cannot make more progress in revising the North American Free Trade Agreement this week — the meetings in Washington starting Wednesday are the fourth of seven scheduled rounds of negotiation — the odds of reaching a deal will fall even further. That would give an opening to Trump to exit the agreement, a move that could disrupt the North American economy.

This could be the decisive week. Canadian Prime Minister Justin Trudeau flies to Washington on Tuesday for a meeting with Trump about the negotiations and will then fly to Mexico to update President Enrique Peña Nieto. Meanwhile, the U.S. negotiating team is expected to finally reveal its hand at the fourth round of talks.

But there are growing risks that the U.S. negotiating stance could underestimate the limits of Mexican and Canadian leaders and inadvertently wreck the accord. “We’re being faced with a U.S. set of demands that is framed by an ‘America first’ perspective,” Lawrence Herman, a Toronto trade lawyer, said. “That colors the negotiations in a very negative way.”

Those who believe that Trump wants NAFTA to fail think he may plant poison pills so unpalatable that Mexico, which has a presidential election next July, might withdraw on its own. Others believe Trump is fulminating as a bargaining ploy.

“I think failure is an option,” said C. Fred Bergsten, a veteran trade expert and senior fellow at the Peterson Institute for International Economics. “It depends on whether the Trump people follow through on their rhetoric.”

Although Trump has blasted NAFTA, he has not yet submitted the formal six-months’ notice required to pull out of the treaty. Instead, his administration has floated the idea of a “sunset clause” that could terminate the agreement after five years, creating uncertainty and discouraging the international investment NAFTA was meant to promote.

And Trump’s team has talked of wiping out bilateral trade deficits — a move that trade experts call “economic nonsense” and one that could be a red line for Peña Nieto, who is worried about being seen as bowing to Trump on unreasonable demands.

One source of uncertainty and frustration in Canada and Mexico is that the Trump administration has not yet made concrete proposals on the most contentious issues — although these may be coming at the fourth round in Washington.

They include “rules of origin,” or the percentage of parts that must be made in North America for a product to qualify for free-trade status; language on how to settle disputes affecting foreign investors; changing Mexican labor standards; and Trump’s stated goal of reducing U.S. bilateral trade deficits.

Robert Lighthizer, the U.S. trade representative, has also blamed some of the problems with the talks on a “whole complicated process” that requires negotiators to clear positions with members of Congress and officials at other agencies.

The delay might also reflect disagreements within the Trump administration. Lighthizer, who is seen as solidifying his control over trade policy, is considered more aggressive about overhauling NAFTA than is Gary Cohn, head of Trump’s National Economic Council. Commerce Secretary Wilbur Ross probably falls in the middle. 

Peter Navarro, the trade hawk who initially had his own independent office, was moved last month to Cohn’s staff, with less direct access to the president.

In Mexico, “informed people are in favor” of striking a deal, said Jorge Guajardo, formerly Mexico’s ambassador to China and now a senior director at McLarty Associates. “But that doesn’t play well politically.” He added, “The mood is set in Mexico for the president to pull out, to call his negotiators back to Mexico City.”

Kurt Honold, president of the Tijuana chapter of Mexico’s Business Coordinating Council, a coalition that advises the country’s NAFTA negotiating team, agrees. “I think the moment could come when you say, fine, we have a lot of opportunities elsewhere, and the biggest losers will be the United States.” Honold said. “The only thing Trump is doing is isolating himself from the world.”

Some of Peña Nieto’s advisers, notably Foreign Minister Luis Videgaray, believe that Trump adviser and son-in-law Jared Kushner will persuade Trump to accept a moderate NAFTA revision. Others, such as Economy Minister Ildefonso Guajardo, are said to be more pessimistic.

Canadian officials are also up in arms. “There isn’t a shared vision, certainly on the part of the president of the United States, on what we’re trying to accomplish,” said Jean Charest, a former premier of Quebec.

“While there is room to update and improve these hot-button issues, the U.S. position seems to be take it or leave it,” says Laura Dawson, director of the Canada Institute at the Wilson Center in Washington.

She said the Canadians are now considering plan B options, including an effort to persuade U.S. trade and business groups worried about a NAFTA breakdown to go to court to challenge the administration’s ability to unravel the deal without congressional oversight.

“The Americans came to the table in Round 1 and somewhat expected the Mexicans and Canadians to kind of just be ready to dance, and I think they were surprised by the fact that each country had its own red lines and made its own positions very clear,” said Michael Camuñez, a former U.S. assistant secretary of Commerce in the Obama administration.

Mexico’s brightest red lines are linked to a Trump administration proposal to “reduce the trade deficit with the NAFTA countries” as part of the negotiations, and to rules of origin.

The U.S. trade deficit with Mexico is $64.4 billion — roughly 6 percent of Mexico’s economy. Erasing that deficit would probably mean a sharp contraction in the Mexican economy. 

That in turn could lead to instability and more migrants to the United States.

Plus, there’s no mechanism for doing that. “How do you write that into a trade agreement?” said Chad P. Bown, a senior fellow at the Peterson Institute. “It’s the kind of thing that depends on the market.”

Moreover, the trade balance is changing. Mexico has opened up its state-run oil and gas sector to foreign companies. U.S. exports of natural gas to Mexico are growing quickly as new pipelines are completed. Cheniere, the Louisiana exporter of liquefied natural gas, said that Mexico is currently its largest customer. 

Mexico could also get hit by changes in the “rules of origin,” which are designed to prevent countries outside North America from using the treaty as a back door into the U.S. market. Under NAFTA, 62.5 percent of the value of an imported vehicle must originate in Canada, Mexico or the United States for that vehicle to get duty-free access to the region.

However, data from the National Highway Traffic Safety Administration shows that U.S.-Canadian content combined makes up just 24 percent of the value of vehicles exported from Mexico to the United States. The Trump administration is weighing a U.S.-only content requirement that could range from 35 percent to 50 percent, according to news reports.

Canada could get hurt if the United States insists on abolishing controversial special courts set up under NAFTA to review anti-dumping or countervailing duties.

Trump’s recent move to slap 219 percent tariffs on Canadian jetliners to block a sale to Delta have reinforced Canada’s view that the courts are needed to restrain U.S. measures.

Lighthizer is expected to try to nix another transnational court for investment disputes, and has backing from a wide variety of constitutional lawyers, environmental and labor groups, and conservative think tanks that say the special courts encroach on U.S. sovereignty.

But the heads of the U.S. Chamber of Commerce, National Association of Manufacturers and Business Roundtable wrote an Aug. 23 letter saying that weakening the process would “undermine business community support.”

The challenges to revising the NAFTA agreement don’t stop at the negotiating table. Even if Trump is able to hammer out an agreement with Canada and Mexico, he will have to take it to Congress for approval.

Rep. Sander Levin, D-Mich., a member of the House Ways and Means Committee, said Democrats and a number of Republicans will oppose the treaty if labor provisions aren’t strengthened.

Levin said Mexico’s Confederation of Mexican Workers has done little to boost wages there, telling an audience at the Council on Foreign Relations that BMW signed a contract in May with a starting salary of $1.10 an hour, moving up to $2.53 an hour.

“Mexico is a democracy with an authoritarian type of labor structure,” Levin said in an interview. “And they have to end that.”

Another dispute looms with the Trump administration’s push to expand an “America first” policy to government procurement.

In the end, however, the negotiations hinge largely on Trump.

“Ultimately, the key variable difficult to predict is the president himself,” said Christopher Wilson, deputy director of the Mexico Institute at the Wilson Center. 

“He has promised a major set of changes to what he has described as the worst agreement ever negotiated, and now it is up to his team to come up with fixes to transform the worst agreement ever into something the president could get behind.”

He added: “It is not easy to see what those changes would be.”

ArcelorMittal plans to invest $1 billion over the next three years in Mexico.