(Adds comments from Caisse's Sabia)
TORONTO, Jan 10 (Reuters) - Caisse de Depot et Placement du Quebec's chief executive said he believes that if U.S. President Donald Trump abandons the North American Free Trade Agreement with Canada and Mexico, the United States would then negotiate a new deal with Canada.
Canada is increasingly convinced that Trump will soon announce the United States intends to pull out of NAFTA, Reuters reported on Wednesday, sending the Canadian and Mexican currencies lower and hurting stocks.
"If that happens, my view is that is just a prelude to another negotiation," Michael Sabia told a Reuters Breakingviews event in Toronto. "We need to think about that in the context of making sure that we handle things in a way that we are well positioned for the subsequent negotiation because it's hard to imagine that there is never another trade agreement."
Sabia urged the Bank of Canada on Wednesday to take a cautious approach to interest rate rises, saying the country's economy faced future headwinds.
"The Bank of Canada needs to be very careful about being too aggressive (in relation to rate hikes). I think there are longer-term structural headwinds in the Canadian economy," he said.
(Reporting by Matt Scuffham; Editing by Peter Cooney and Lisa Shumaker)