President Donald Trump is not inclined to withdraw from the North American Free Trade Agreement, CNBC senior contributor Larry Kudlow said Tuesday, citing White House sources.
Instead, the president is inclined to renegotiate the pact between the U.S., Canada and Mexico, "difficult as that's going to be," Kudlow said.
Still, Kudlow, who has been concerned about Trump possibly walking away from NAFTA, cautioned that "this is subject to daily change."
Trump has repeatedly threatened to withdraw from the trade agreement unless there are major changes to make it, in his eyes, a fairer deal for the U.S.
Last week, Reuters reported that Canada is increasingly convinced that Trump will pull out of NAFTA. Trump then told The Wall Street Journal that he will leave his decision on a deal "a little bit flexible" because of the presidential election in Mexico this year.
Kudlow said the U.S. doesn't want to play into the Mexican election, which could make things "far worse."
He also suspects the Trump administration knows that leaving NAFTA will knock the stock market down.
"There's a potential blow up in the stock market if we leave NAFTA. We're talking agriculture. We're talking car parts. We're talking trucking, transportation, energy," he said.