Trump announced approval from the Oval Office on Monday, and Mexican President Enrique Peña Nieto called a conference call.
But the deal left open the question of whether Canada, the third country in NAFTA, the change – and Trump himself said he wanted to throw the name NAFTA altogether.
"They called it NAFTA," said Trump. "We'll call it the trade agreement between the United States and Mexico, and we'll get rid of NAFTA because it has a bad connotation."
US Sales Representative Robert Lighthizer said the agreement was "absolutely magnificent" and would modernize a trade deal that "was seriously out of balance". He said he hoped the Congress would approve it with broad bipartisan support.
In a separate talk with reporters, Lighthizer highlighted some major changes that the negotiators of both countries agreed to.
- Car Manufacturing: The new deal would require 75%. The parts sold in every car in North America will be produced in the United States or Mexico. At present, about 62% of the parts have to be produced in the United States, Mexico or Canada.
- Higher labor standards: The new agreement would require 40% to 45% of car parts in cars sold to be produced by workers earning at least $ 1
- Sunset Clause: The agreement lasts 16 years and is reviewed every six years. Much of the business community was concerned about Trump's trade policy, and the stock market reacted positively to the news of a deal. The Dow rose more than 250 points and the S & P 500 and the Nasdaq reached new highs on Monday.
The agreement between the two countries could resume NAFTA negotiations with all three parties – the United States, Mexico and Canada.
Despite Trump's signal that the agreement could lead to a bilateral trade agreement between the United States and Mexico, Peña Nieto expressed through a translator his "desire that Canada now be involved in this process"  Mexico and Canada is determined to maintain the trilateral format of the NAFTA Free Trade Agreement, although Trump has signaled the desire for individual agreements with each country.
"Canada is encouraged by the continued optimism of our country's negotiating partners," said a spokeswoman for Canadian Foreign Minister Chrystia Freeland.
"Progress between Mexico and the United States is a necessary condition for any renewed NAFTA agreement," he said.
Freeland will travel to Washington on Tuesday to continue negotiations.
About a year ago, negotiations began on the recast of the three-country NAFTA agreement.
The 24-year trade agreement generally prevents the three parties from imposing tariffs on imports. But Trump has called the agreement "the worst deal that may ever have been signed" and started tariffs earlier this year.