Kudlow Says Nafta Deal Would Be Test of Trump Trade Cooperation

White House economic adviser Larry Kudlow said agreement on a new North American Free Trade Agreement would demonstrate the U.S. can avoid an outright confrontation with China.

President Donald Trump doesn’t want “a trade war, I don’t want a trade war, I don’t expect one. I think this is all going to get resolved, I really believe, over time,” Kudlow said at an event in Washington on Tuesday. “The first step here is Nafta. I think if we can get a deal on renewing Nafta and changing Nafta to our liking, that really would be a very good kind of foundation to move on.”

Nafta negotiators at the senior political level have been racing to wrap up a deal, with Canadian Prime Minister Justin Trudeau and Trump discussing the possibility of reaching a quick conclusion during a phone call on Monday, according to Trudeau’s office. House Speaker Paul Ryan increased the time pressure for negotiators last week by saying he’d need to be notified about a deal by May 17 to give the current Congress an opportunity to approve it.

Mexican Economy Minister Ildefonso Guajardo said on Tuesday said that he doesn’t think a pact will be secured this week, which may push talks into later this year. Campaigning is gathering pace before Mexico elects a new president on July 1, which could make the talks more politically complicated.

“The possibility that from here to Thursday we have the full negotiation is not easy, we do not believe that it will happen from here to Thursday,” Guajardo told Televisa network.

Kudlow said he saw the odds of the U.S., Canada and Mexico agreeing on a new Nafta deal at a slim 51-49.

“I don’t want to play anyone’s hand,” said Kudlow. “They are working very hard.”

The Nafta talks are competing in a long list of Trump administration priorities. The White House is increasingly preoccupied with its efforts to reach a peace deal with North Korea and avoid a trade war with China. Vice Premier Liu He — who is President Xi Jinping’s top aide for economic matters — will be in Washington this week for talks with the administration on ways to resolve the trade dispute between the two countries.

Kudlow, who was part of a delegation led by Treasury Secretary Steven Mnuchin that visited Beijing from May 3-4, said the world’s two-biggest economies can probably avoid a trade war and even have an agreement “very soon.” The question is whether that deal will be adequate for Trump to back down from his threat of imposing Chinese tariffs, he said.

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