Canadian Prime Minister Justin Trudeau speaks with U.S. President Donald Trump in the White House on Oct. 11, 2017.

"Yesterday we met with the president a couple times and he is very seriously contemplating kind of a shift in NAFTA negotiations," Kudlow said on "Fox & Friends." "His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately."

It's not clear whether pursuing bilateral trade agreements with the two countries would effectively end the trilateral North American Free Trade Agreement, which has been in place for more than two decades.

President Donald Trump is "very seriously contemplating" separate trade negotiations with Canada and Mexico, White House economic advisor Larry Kudlow said Tuesday.

"I think the important thought here is he may be moving quickly towards these bilateral discussions instead of as a whole," Kudlow said.

The Canadian dollar and Mexican peso fell on Tuesday vs. the U.S. dollar in the wake of the comments from Kudlow.

A Canadian government official pointed out this was not the first time the Trump administration has suggested a bilateral, rather than multilateral, approach. The White House and Mexican government did not immediately respond to CNBC emails for comment. Canada and Mexico are the second and third-largest trading partners of the U.S., respectively.

On Friday, Trump said he "wouldn't mind" separate negotiations with the two countries. A day earlier, his administration said it would impose tariffs on steel and aluminum imports from Canada, Mexico and the EU.

In reaction, Canada last week proposed tariffs on a range of goods, including ball-point pens, toilet paper and maple sugar.

Mexico said Tuesday it will impose tariffs of 15 to 25 percent on U.S. steel products, a 20 percent tariff on U.S. pork legs and shoulders, apples and potatoes and 20 to 25 percent duties on types of cheese and bourbon.

"Canada's a different country than Mexico. They have different problems," Kudlow said. "Often times when you have to compromise with a whole bunch of countries you get the worst of the deals."

— Reuters contributed to this report.