UPDATE 2-Canada pledges to stick with NAFTA talks, Mexico works on Plan B

(Recasts with Trudeau)

MEXICO CITY, Oct 12 (Reuters) - Prime Minister Justin Trudeau said on Thursday Canada will not walk away from talks to rehash the North American Free Trade Agreement(NAFTA) despite a U.S. proposal to include a clause that could terminate the pact in five years.

Speaking at a news conference in Mexico City as a fourth round of talks to rehash the North American Free Trade Agreement(NAFTA) was held near Washington, Trudeau and Mexican President Enrique Pena Nieto said they were committed to a "win-win-win" deal.

The talks in the United States hit obstacles Thursday due to hardline U.S. demands that include adding a so-called "sunset clause" to NAFTA that would force negotiations of the $1 trillion pact every five years.

"We will not be walking away from the table based on the proposals put forward," Trudeau said, in response to a question about whether the clause was a poison pill for the talks.

Pena Nieto said Mexico would keep working with Canada and the United States to reach a deal that was beneficial for all three countries.

Asked whether bilateral deals were possible if talks failed, Pena Nieto said NAFTA was a good mechanism with which to power the North American economy, but not the only one.

The United States also wants to boost how much North American content autos must contain to qualify for tax-free status and modify dispute settlement mechanisms.

Business leaders from all three countries have said the U.S. proposals could derail the talks.

Earlier on Thursday Mexican Finance Minister Jose Antonio Meade said Mexico was analyzing tariffs and import substitution plans in case NAFTA was scrapped.

"We have the possibility of identifying tariff measures, we have the possibility to identify other markets to be our providers and other markets that we can turn to," Meade told senators in the capital.

"We're working on that, we have been working and perfecting the analysis to identify not only industries but companies that could help the contingency if we don't reach a satisfactory negotiation."

Meade did not give details of what tariffs were being analyzed. In 2011, Mexico successfully used targeted tariffs on U.S. goods such as pork and cheese to win a dispute over trucks.

Meade's comments drove the peso to a nearly five-month low of 18.92 against the dollar, a fall of more than 1 percent in the session. The currency has shed close to 4 percent since Oct. 3 on concerns the NAFTA talks could founder. (Reporting by Sharay Angulo; writing by Michael O'Boyle; editing by Frank Jack Daniel, Jonathan Oatis and Michael Perry)