In Trump win, Canada, US deal saves NAFTA as trilateral pact

The deal will preserve a trade dispute settlement mechanism that Canada fought hard to maintain to protect its lumber industry and other sectors from U.S. anti-dumping tariffs, Canadian sources said.

But it came at a cost.

Canada has agreed to provide U.S. dairy farmers access to about 3.5 percent of its approximately $16 billion annual domestic dairy market. Although Canadian sources said its government was prepared to offer compensation, dairy farmers reacted angrily.

"We fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood.” Pierre Lampron, president of Dairy Farmers of Canada, said in a statement.

"This has happened, despite assurances that our government would not sign a bad deal for Canadians."

The deal also requires a higher proportion of the parts in a car to be made in areas of North America paying at least $16 an hour, a rule aimed at shifting jobs from Mexico.

Canada and Mexico each agreed to a quota of 2.6 million passenger vehicles exported to the United States in the event that Trump imposes 25 percent global autos tariffs on national security grounds.

The quota would allow for significant growth in tariff-free automotive exports from Canada above current production levels of about 2 million units, safeguarding Canadian plants. It is also well above the 1.8 million cars and SUVs Mexico sent north last year.

But the deal failed to resolve U.S. tariffs on Canada's steel and aluminum exports.

The Trump administration had threatened to proceed with a Mexico-only trade pact as U.S. talks with Canada foundered.

"It's a good night for Mexico, and for North America," Mexican Foreign Secretary Luis Videgaray said.

The news delighted financial markets that had fretted for months about the potential economic damage if NAFTA blew up.

U.S. stock index futures rose, with S&P 500 Index e-mini futures up more than 0.5 percent, suggesting the benchmark index would open near a record on Monday.

The Canadian dollar surged to its highest since May against the U.S. dollar, gaining around 0.5 percent. The Mexican peso gained 0.8 percent to its highest against the greenback since early August.

"Though markets were already anticipating an agreement, one source of worry will be swept away if a deal is made," Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo, said.

"That will lead to a rise in trust in the U.S. economy, so it's easy for risk sentiment to improve."