Mexico says Trump's unsurprising Nafta threats a negotiating tactic

Initial talks to renegotiate between Mexico, US, Canada ended with no breakthrough

US President Donald Trump's threat to scrap the Nafta trade pact is little more than a negotiating tactic, aimed at his political base, that should neither scare nor surprise Mexico, the country's foreign minister said on Wednesday as the peso weakened.

In a speech in Phoenix on Tuesday night, Trump reiterated his threats to terminate the North American Free Trade Agreement, saying the pact's future looked bleak. Trump has long called the 1994 pact a bad deal that hurt American workers, saying it should be re-negotiated or ended.

Initial talks to re-negotiate Nafta between Mexico, the United States and Canada ended in Washington this weekend with no sign of a breakthrough and further discussions are due in Mexico City in September.

Following Trump's remarks on Tuesday, Mexico's peso weakened more than 1 per cent in early trading on Wednesday before paring losses, as market jitters on the future of Mexican exports to the United States continue to plague the currency.

Videgaray, speaking on local television, sought to brush off the threat, saying Trump's comments were simply a negotiating tactic and Mexico would keep negotiating as well. The comments were not a surprise, nor would they scare Mexico, he added.

"He's negotiating in his own particular style," Videgaray said.

He added that Trump's proposed wall along the southern US border with Mexico was not part of the bilateral agenda between the two countries.

Mexico's currency fell to record lows in the wake of Trump's victory in the US presidential election last November, with investors scared he could hurt Mexican exports and cause a recession south of the border.

However, the peso has recovered since then, as many of investors' worst fears seemed to subside.

In recent months, peso traders increasingly appeared to pay little heed to some of Trump's comments, helping a recovery in the currency.

But Trump's speech on Tuesday night showed traders remain skittish about the future of Nafta, and highlighted the complexity of the talks to re-negotiate the treaty with Trump looming over proceedings.

The peso was down 0.58 per cent early on Wednesday, at 17.7690 pesos per dollar.