OTTAWA—Canadian Prime Minister Justin Trudeau began on Monday selling the merits of the country’s eleventh-hour trade pact with the U.S. on a revised North American Free Trade Agreement, arguing the deal removes a layer of uncertainty that has stunted growth.
Completion of the deal comes at a pivotal moment for the Canadian leader, who faces a re-election test in just over a year and must persuade voters—already obsessed with Canada’s relationship with the U.S.—that Ottawa didn’t simply cave in to President Trump’s demands. Indeed, Mr. Trudeau’s main political rivals on Monday said the Liberal government “capitulated” to the U.S. in its quest to get a deal.
“The style and the spin with which Trudeau sells the deal Canada gets will be almost as important in the short term for his political fortunes as the actual substance of the deal,” said Shachi Kurl, executive director of Angus Reid Institute, a polling organization.
Mr. Trudeau defended the deal at a press conference and in the Canadian legislature, saying the trade-dependent economy—in which three quarters of its exports are U.S.-bound—is on more solid footing. “Free and fair trade in North America .. is in a much more stable place than it was yesterday,” he said. “We now have a path forward.”
Before Sunday night’s agreement, the Bank of Canada had warned some companies were scaling back investment plans given Nafta’s cloudy outlook. Among those companies was Sle-Co Manufacturing of London, Ontario, which employs 130 people in Canada and the U.S. and makes components for interior and exterior automobile trims.
Jeff Sleegers, president of the family-owned entity, said it hasn’t cut payroll but has put U.S. expansion plans on hold and turned down business. “It’s been a stressful year for the whole management team,” said Mr. Sleegers, prior to Sunday’s Nafta deal. A resolution, he said, would likely revive investment plans.
Attaining a deal with the U.S. wasn’t easy, Mr. Trudeau said. “We had to make compromises. And some were more difficult than others. We never believed it would be easy, and it wasn’t.”
In the deal, Canada got the U.S. to preserve an independent dispute-resolution system, which allows Ottawa and Washington to resolve disagreements over the use of tariffs through an independent panel. This was a priority for the Canadian team. Further, the U.S. has removed the imminent threat of tariffs on Canadian-made motor vehicles and auto parts.
And rules requiring auto makers to build a greater portion of a car in North America and with higher-wage workers to avoid duties is also seen a triumph for Canada, as it too has lost manufacturing jobs over two decades to Mexico.
However, Ottawa was unsuccessful in getting Washington to immediately lift national-security tariffs on Canadian-made steel and aluminum. The U.S. and Canada will now negotiate their removal, with the U.S. pushing for quotas on future steel and aluminum exports, according to a person familiar with the process.
Easily the most contentious element of the revised Nafta in Canada involves concessions on dairy. The Dairy Farmers of Canada, a lobby group representing 10,500 producers, said the deal grants access to an additional 3.6% of the country’s dairy market to the Americans, or beyond what the U.S. was initially granted in the Trans Pacific Partnership before Mr. Trump withdrew the U.S. from it after he became president.
Also, Canada agreed to drop its complex “Class 7” pricing system, which made it hard for some U.S. dairy products to compete in Canada and was a major demand of U.S. farmers in Nafta talks.
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The trade deal was reached on the eve of a provincial election in Quebec, where the incumbent Liberal Party is fighting a close race for re-election. Quebec Premier Philippe Couillard said on Twitter Monday that he told Mr. Trudeau the new trade deal is bad for Quebec and will hurt the province’s dairy producers. “The federal government has opened a big door to the United States,” Mr. Couillard wrote.
Anticipating the backlash, Mr. Trudeau pledged Monday to fully compensate Canada’s dairy farmers for any loss of market share related to the revised Nafta. He added at his press conference that the dairy concessions “were not ideal.”
David Wiens, a Manitoba-based farmer and vice-president of the Dairy Farmers of Canada, called the concessions “devastating” and said Canada has already given up significant market access in previous trade deals. “We’re looking at death by a thousand cuts here,” Mr. Wiens said. “It’s unbelievable that this could have been done.”
Ms. Kurl, the pollster, said voters are aware of the challenge Canadian officials faced in the Trump administration, and its hard-nosed approach to rewrite the book on global trade. As a result, “there is already a built-in benefit of the doubt for Trudeau” on the outcome of the Nafta talks, she said.
The Liberal government “pulled a trade chestnut out of the fire. It’s slightly burned but it’s still a pretty edible agreement,” said Fen Osler Hampson, a foreign-affairs professor and author at Carleton University in Ottawa. “This is more of a case of respectable relief. We dodged a bullet.”
While applauding Ottawa’s ability to cut a deal with the Trump administration, Canada’s largest business-lobby group, Canadian Chamber of Commerce, said the turbulent talks should teach the country’s policymakers a key lesson. “We must never again allow ourselves to be overly-dependent upon one trading partner,” the chamber said in a release. “We must continue to diversify our markets to protect ourselves from capricious and unfair actions in the future.”
Write to Kim Mackrael at kim.mackrael@wsj.com and Paul Vieira at paul.vieira@wsj.com