Politics

Trump's Canada-Mexico trade pact is 'more important' to the economy than a deal with China, Larry Kudlow says

Key Points
  • Larry Kudlow tells CNBC that enacting a trade pact with Mexico and Canada to replace the North American Free Trade Agreement is "more important" for the U.S. economy than a deal with China.
  • Kudlow also says that he remains hopeful that negotiations between Beijing and the U.S. can be repaired after stalling last month.
  • Kudlow's emphasis on the USMCA over the China deal indicates that Trump aims to pressure Democrats to support ratification ahead of the 2020 election.
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Watch CNBC's full interview with NEC director Larry Kudlow

President Donald Trump's top economic advisor, Larry Kudlow, told CNBC on Tuesday that enacting a trade pact with Mexico and Canada to replace the North American Free Trade Agreement is "more important" for the U.S. economy than a deal with China.

Kudlow also said that he remains hopeful that negotiations between Beijing and the U.S. can return to the position of apparent near alignment they enjoyed before talks appeared to stall out last month, amid disagreements between the two economic superpowers.

Kudlow's remarks on CNBC's "The Exchange" came just days after Trump scrapped plans to slap increasing tariffs on all Mexican goods coming into the U.S. until Mexico took sufficient steps to stem the flow of migrants coming to the southern U.S. border. The two countries struck an agreement, many details of which are still unknown, on Friday after talks in Washington.

Experts have said that imposing new tariffs on Mexico — a move Trump has said is still on the table — could jeopardize the U.S.-Mexico-Canada Agreement, or USMCA, which has been approved by the three countries' leaders. The nations' legislatures have yet to ratify the deal.

Kudlow's emphasis on the USMCA over the China deal indicates that Trump aims to pressure Democrats to support ratification ahead of the 2020 election. Democrats, who hold the majority in the House, have raised concerns about how the new agreement would address labor and environmental issues, among other provisions.

"Let me give you something that I think is more important than China, vis-a-vis the economy," Kudlow said, referring to the USMCA. "We are hoping that Congress will sign off on it ... Canada and Mexico are gigantic trading partners and I think in economic terms, that's probably more important than the China story."

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Trump: Mexico will make a trade announcement

Trump told reporters at the White House that "we're going to sit down at some point with the Democrats" to discuss immigration. But a spokesman for House Speaker Nancy Pelosi, D-Calif., told CNBC that there has been "no outreach to us" on this topic.

Kudlow's remarks also appear to downplay the Trump administration's urgency to strike a deal with China to address trade deficits, intellectual property theft and forced technology transfers — issues Trump has railed against throughout his presidency.

Current and former administration officials told CNBC on Tuesday not to expect a deal to come out of Trump's expected meeting with Chinese President Xi Jinping at the G-20 summit in Osaka, Japan, at the end of June.

Commerce Secretary Wilbur Ross cautioned that a G-20 meeting would only lay the groundwork for a possible deal. Former White House trade advisor Clete Willems, in a separate interview, told CNBC point-blank that "there won't be a deal at the G-20."

Kudlow said he hopes that negotiators can "pick up where we left off on achieving a really good deal" at the summit.

But he stressed that "anything that works has got to be good for our farmers and ranchers and blue-collar workers."

Kudlow continued to predict economic growth of 3% with or without a "satisfactory" China deal, saying, "That 3% number is not contingent on a China deal that might not be satisfactory for American interests."