The agreement comes after a year of re-negotiations with Mexico, and the President said negotiations with Canada will begin soon.
President Trump added, the move will be an "incredible deal" for both countries, especially for the manufacturing and farming industries.
Shares of top automakers rallied Monday after the USA and Mexico reached a preliminary trade deal, ending months of uncertainty for auto production.
During a phone call on Monday with Mexican President Enrique Peña Nieto, President Donald Trump said that if Canada could not agree to the deal, he would "like to call this deal the USA and Mexico Trade Agreement", adding that NAFTA had a "lot of bad connotations".
The US trade representative, Robert Lighthizer, and the Mexican secretary of economy, Ildefonso Guajardo, walked together into the White House without talking to reporters on Monday.
But Canada's minister of foreign affairs, Chrystia Freeland, said that "once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues". The Mexican president said he wanted the former. Yet the preliminary agreement announced Monday is far from final.
US automakers have opposed raising the North American content requirement, but the United Auto Workers union has supported it. Canada has been on the sidelines for the last month, as the USA and Mexico have tried to work through their problems.
Trump says he will be calling Prime Minister Justin Trudeau.
He added he plans to terminate the existing trade agreement and instead replace it with the deal reached with Mexico, and potentially Canada.
How quickly Canada will rejoin talks remains unclear.
Trump has repeatedly indicated he would prefer to reach bilateral agreements with Canada and Mexico, but the two countries have maintained a united front that a trilateral agreement is the only one they will sign.
Renegotiation talks between the three countries began past year. A month of talks followed, in August, but a new roadblock emerged: Mexico's outgoing administration had a different position on foreign access to the country's energy sector than the incoming one, which delayed an agreement to this week.
"This is something very positive for the United States and Mexico", Pena Nieto replied, saying he is looking forward to toasting Trump with tequila to celebrate, expressing to his American counterpart that he is "really grateful and greatly recognize and acknowledge your political will in all of this". Canada will now need to rejoin talks - the USA hadn't invited them for weeks - and sign off on the deal, as well as resolve its own irritants.
On the same call, a senior administration official said it was only in the last few weeks that inking a two-way deal was viewed as the best next step in the NAFTA talks.
The president said he plans to "terminate" the existing NAFTA agreement, which now includes Canada.