President Donald Trump won't immediately terminate U.S.participation in the North American Free Trade Agreement, the WhiteHouse said, after he spoke with the leaders of Mexico and Canadaabout ways to renegotiate the accord.

“Both conversations were pleasant and productive. PresidentTrump agreed not to terminate Nafta at this time and the leadersagreed to proceed swiftly, according to their required internalprocedures, to enable the renegotiation of the Nafta deal to thebenefit of all three countries,” the White House said in astatement late Wednesday. Mexico's peso and Canada's dollar jumpedafter the White House's announcement.

Trump on the campaign trail last year made a hawkish vow to pullout of Nafta — which he repeatedly called the “worst trade dealever” — if the U.S. didn't get a better deal through immediaterenegotiation. His decision Wednesday marks a continuing softeningof his rhetoric on trade, after he recently said he would notdeclare China a currency manipulator, another campaign promise.

Trump said on Twitter on Thursday morning that he received callsfrom the leaders of Mexico and Canada, Enrique Pena Nieto andJustin Trudeau, “asking to renegotiate NAFTA rather thanterminate.” Trump said he agreed, “subject to the fact that if wedo not reach a fair deal for all, we will then terminate NAFTA.Relationships are good-deal very possible!”

Trump's top advisers had been embroiled in a debate over howaggressively to proceed on reshaping U.S. participation in Nafta,with hard-liners favoring a threatened withdrawal as soon as thisweek and others advocating for a more measured approach toreopening negotiations with Canada and Mexico.

Some of Trump's advisers wanted a dramatic move before Trump's100th day in office on Saturday to fulfill a key campaign promise,while others said he could let the milestone pass and revisit theissue later through more formal procedures, according to two WhiteHouse officials who spoke on condition of anonymity to discussinternal deliberations.

The dispute played out in the media Wednesday, with severaloutlets saying Trump would take the most dramatic available option—issuing an order declaring his intention to withdraw from thetreaty. In this case, threatening to withdraw would have amountedto a formal step that started the process of giving Mexico andCanada six-months notice that Trump intended to startnegotiating.

Exactly who in the White House sparred over the decision wasn'tknown, but one of the most prominent anti-trade hard-liners issenior counselor to the president Steve Bannon, and Trump'sdecision is sure to be viewed as a defeat for Bannon and his views.Bannon already is seen as being on the outs with Trump overreportedly sparring with Trump's son-in-law Jared Kushner.

New Talks

Instead of announcing his intent to withdraw from the agreement,Trump is asking the two other nations to open talks on ways to makethe deal more balanced from the U.S. perspective, which is allowedwithin the framework of the treaty. His conversations withPena Nieto and Trudeau took place late Wednesday afternoon,according to the White House.

“It is my privilege to bring Nafta up to date throughrenegotiation,” Trump said in the White House statement. “I believethat the end result will make all three countries stronger andbetter.”

Commerce Secretary Wilbur Ross told CNBC on Thursday that Mexicoand Canada appear to be ready to start renegotiations of the tradepact. One of the issues he said the U.S. wants to target is therules regarding country of origin of products sold under the deal.He said that Mexico's trade deficit with China is approximatelyequal with their trade surplus with the U.S., indicating thatproducts made in China are being sold under Nafta.

“The whole idea of a trade deal is to build a fence aroundparticipants inside and give them an advantage over the outside,”Ross said. “So there is a conceptual flaw in that — one of the manyconceptual flaws in Nafta.”

Talk that Trump would revisit Nafta on Wednesday had causedMexico's peso, the Canadian dollar and shares of companies thatrely on cross-border trade to plunge.

“Even if he notifies Mexico and the U.S. of his intentions, thatdoesn't mean he has to leave,” said Beatriz Leycegui, who wasMexico's deputy minister on foreign trade between 2006 and 2011.“This is a strategy to bring pressure on Canada and Mexico.”

Trump must give Congress 90-days notice that he seeks torenegotiate the accord. Ross said on Tuesday that theadministration is busy working with lawmakers to kick startrenegotiation of the deal, and that the U.S. was embarking on amore muscular strategy for trade-enforcement.

Trump has blamed Nafta for hollowing out America's manufacturingsector by relocating jobs to lower-cost Mexico — which hisadministration initially said was the main target of changes he wasseeking to the accord.

'Disastrously Bad'

Where Trump stands on Nafta has been hard to discern. Afterharsh rhetoric during the campaign, he has in recent weeks toneddown his criticism, suggesting the relationship with Canada onlyneeds tweaking. This week, he fueled trade tensions by imposing newduties on softwood lumber imports from Canada and vowing to defendU.S. dairy farmers against quotas imposed in Canada.

A number of Republicans are strong backers of free trade andhave cautioned the administration against walking away from thefree-trade deal.

“Scrapping Nafta would be a disastrously bad idea,” RepublicanSenator Ben Sasse of Nebraska, who was a Trump critic during thecampaign, said Wednesday in a statement. “It would hurt Americanfamilies at the check-out, and it would cripple American producersin the field and the office.”

Republican Senator Jeff Flake of Arizona also blasted the ideaon Twitter, writing, “Increasing trade barriers with CAN and MEXwill result in lost jobs and higher consumer costs in #AZ.Strengthen #NAFTA, don't abandon it.”

Without Nafta — which reduced or eliminated tariffs on mosttrade products after taking force in 1994 — commerce ties betweenthe nations would need to be reset, raising the specter of morefrequent trade disputes and higher tariffs.

U.S. trade with its Nafta partners has more than tripled sincethe agreement took effect, rising to $1.1 trillion last year.Canada followed by Mexico ranked as the two biggest markets forU.S. exports, taking in a combined 34% of the total in 2016,according to a February paper published by the CongressionalResearch Service.

From: Bloomberg News

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