WASHINGTON—U.S. President Donald Trump wants to split NAFTA negotiations in two, pursuing separate deals with Canada and Mexico rather than trying to update the three-country North American pact, Trump’s top economic adviser says — but it was unclear on Tuesday whether the president was doing anything to act on that desire.

Larry Kudlow, director of the National Economic Council, said Trump was “not going to withdraw from NAFTA” but wanted to try “a different approach” because the three-country negotiations have stalled. Kudlow said the administration was waiting to hear back from Prime Minister Justin Trudeau’s government about the idea of separate negotiations.

The Trudeau government shrugged off Kudlow’s remarks as insignificant chatter, noting that Trump has long expressed the opinion that two-country deals are better than multi-country deals. A Canadian official who spoke on condition of anonymity said the Trump administration had not made any official request about splitting up the talks.

“People have speculated about separate negotiations for about 18 months now. As Canada has maintained right from the beginning, we believe in a trilateral NAFTA,” Andrew Leslie, parliamentary secretary to the foreign affairs minister on Canada-U.S. relations, told reporters in Ottawa.

“There’s all sorts of sounds coming from all sorts of sources. We react to the facts,” Leslie said.

Trump press secretary Sarah Sanders declined to express a firm preference for separate negotiations. Sanders said the president is “open” to separate agreements but that the best deal for American workers might come through NAFTA.

Kudlow said Trump had asked him to express his preference for separate negotiations.

“Yesterday we met with the president a couple times, and he is very seriously contemplating kind of a shift in the NAFTA negotiations. His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately. He prefers bilateral negotiations, and he’s looking at two much different countries,” Kudlow said on Fox News’s Fox and Friends.

“Canada is a different country than Mexico, they have different problems, and you know, he’s believed that bilaterals have always been better,” Kudlow said. “He hates these multilateral — the large treaties. Now I know this is just three countries but still, you know, oftentimes when you have to compromise with a whole bunch of countries you get the worst of the deals.”

The prime minister is rejecting a bid by the Trump administration to strike bilateral agreements with Canada and Mexico instead of pursuing a new NAFTA. Justin Trudeau says a trilateral approach is “better” for all three countries. (The Canadian Press)

Peter Clark, an Ottawa-based trade strategist, said Canada is better served by a three-country negotiation.

“Canada and Mexico really have no interest in trying to do these things one on one,” said Clark, president of Grey, Clark, Shih and Associates. “Misery loves company. They can be more effective saying no to particular issues if they do it jointly.”

John Murphy, a senior vice-president at the U.S. Chamber of Commerce, which supports NAFTA, noted that both Canada and Mexico oppose several major U.S. proposals, including a U.S.-friendly government procurement policy and “sunset clause” that would terminate the deal in five years absent new agreement from all three countries. Negotiating two deals separately, Murphy said on Twitter, won’t “change those realities.”

The three-country deal is supported by most big businesses, which find it easiest to comply with one set of rules rather than two and which benefit from having a largely tariff-free zone across North America. Some companies, particularly in the auto industry, have created supply chains that include plants in all three countries.

“When you talk about this issue, you have to talk about reality. Reality is over the last 24 years we have built a very integrated supply chain, which has been good for the economy, good for consumers, good for workers on all sides,” said International Trade Minister François-Philippe Champagne.

Kudlow’s comments add to the uncertainty about whether Trump is eventually planning to initiate a U.S. withdrawal from NAFTA, which he has regularly derided as a disaster for American workers. Clark said “the easiest way” for Trump to pressure Canada and Mexico into making separate deals is to initiate a termination of the current deal.

Scott Lincicome, a trade lawyer and an adjunct scholar with the pro-trade Cato Institute, said he saw good news in Kudlow’s words: this was the first time a senior Trump official had publicly said Trump was not going to withdraw from the current NAFTA. But Lincicome also noted that the administration’s positions change with high frequency.

Kudlow’s comments came the week after Trump imposed tariffs on steel and aluminum from Canada and Mexico under a national security provision of U.S. trade law. Both countries announced plans to introduce retaliatory tariffs on a variety of U.S. products and to challenge the U.S. tariffs at the World Trade Organization.

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Correction — Sept. 4, 2018: This article was edited from a previous version that mistakenly said Peter Clark is a trade lawyer. In fact, Clark is a trade strategist.

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