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WASHINGTON, U.S. – After a year of delays and threats that have roiled financial markets, the U.S. President Donald Trump claimed to have achieved a breakthrough in renegotiating a 25-year-old regional trade deal on Monday.

After calling it the worst ever trade deal signed by the U.S., Trump demanded a renegotiation of the North American free Trade Agreement (NAFTA) in April last year.

The accord signed between the three countries in 1994, led to the creation of the world’s largest free trade zones by reducing or eliminating tariffs on most products.

Over the last 20 years, economies of these countries have intertwined, with the volume of trade multiplying and today, NAFTA covers more than $1 trillion in annual trade.

Since Trump’s demands last year, negotiators from the three countries have held talks to reach common ground, in a bid to modernize the three-nation pact even as the delays have placed pressure on the Mexican peso and the Canadian dollar.

However, over the last few months, ties between the U.S. and Canada have soured since Trump has blamed the trade agreement for a decline in U.S. manufacturing jobs, especially in the auto industry.

Even though the U.S. Chamber of Commerce has acknowledged the need to “modernize” the agreement, it also categorically pointed out that 14 million American jobs directly depend on the deal.

Yet, Trump hasn’t hesitated in publicly feuding with the U.S. neighbours, accusing Canada of “dumping” lower-priced goods in the U.S. market, which he claimed has pushed out American competitors.

The Canadian Prime Minister Justin Trudeau has conceded that “NAFTA isn’t perfect” but has argued that “free trade has worked.”

Over the last five weeks of renegotiation talks, Trudeau’s negotiators have not been part of the process – making the agreement announced on Monday, largely bilateral.

After concluding crucial meetings with Mexican officials, Trump issued a televised statement from the White House on Monday and declared that the U.S. and Mexico had agreed to overhaul NAFTA. 

Trump claimed that the agreement reached on key trade terms is set to make for an “incredible” deal that was “much more fair.”

The agreement struck sans the third trade partner came as Mexican negotiators are rushing to sign the deal before the newly elected Mexican president, Andres Manuel Lopez Obrador, takes office in December. 

However, this is likely to add immense pressure on Canada, which would now be forced to agree to the new terms on auto trade and other issues to remain part of the three-nation pact.

Both Trump and the outgoing Mexican President Enrique Pena Nieto said talks with Canada would begin immediately.

However, while Trump threatened to put tariffs on Canadian-made cars if a three-way deal could not be reached – Canadian officials, who are due to rejoin talks on Tuesday, have said that they are looking forward to “a constructive conversation.”

Trudeau’s office said in a brief statement that he is “looking forward to having their teams engage this week with a view to a successful conclusion of negotiations.”

Further, a spokesman for Canadian Foreign Minister Chrystia Freeland said the country is “encouraged” by the progress made by the U.S. and Mexico.

Meanwhile, Trump said, “I think with Canada, frankly, the easiest we can do is to tariff their cars coming in. It’s a tremendous amount of money and it’s a very simple negotiation. It could end in one day and we take in a lot of money the following day.”

To reach the deadline, Canada would have to agree to the terms by Friday, when the White House would have to formally notify Congress that Trump will sign the deal in 90 days. 

Further, the Congress has to approve it within the period too.

Following the announcement on Monday, U.S. shares rose and the Mexican peso strengthened.

While the peso firmed about 1.3 percent against the dollar, heading for its best one-day gain in more than a month, Mexican stocks jumped 1.4 percent to a seven-month high.