Mexico: We'll talk NAFTA but don't dare use tariffs

Mexico: Tariffs would be a deal breaker on NAFTA
Mexico: Tariffs would be a deal breaker on NAFTA

Mexican officials are happy to renegotiate a trade deal with President Trump and his team to make it more balanced.

But they warn their US counterparts: Don't play tough and slap taxes on us.

"As long as these objectives of rebalancing trade are not about introducing tariffs or introducing quotas, we're okay with talking about that," Mexico's economic secretary, Ildefonso Guajardo, told CNN's Richard Quest on Monday.

Guajardo is Mexico's top negotiator for NAFTA, the free trade deal between the US, Mexico and Canada. Trump regularly lambasts NAFTA and as recently as last month, threatened to pull out of it.

Related: Mexico's message: 'We have a lot of alternatives'

If Trump reiterates the threat, Guajardo indicated it would be a deal breaker for negotiations, which are expected to start in August or September.

"Obviously, Mexico will not sit [at] the negotiating table with that kind of pressure," Guajardo told Quest.

Leaders from all three countries tend to say the same thing: they want to "modernize" NAFTA, which became law in 1994. After all, the agreement has nothing in it about e-commerce, Mexico's energy sector or telecommunications.

Related: Senate confirms Trump's top NAFTA negotiator

However, Trump promised voters that a new NAFTA would bring manufacturing jobs back to the US. It's unclear how updating the agreement with those sectors will significantly create new manufacturing jobs.

NAFTA talks are entering a sensitive environment. Trump slapped a 20% tariff on Canadian lumber and he recently threatened to tax products imported to the US by Rexnord, which moved jobs to Mexico.

All of Trump's tough talk hasn't dimmed the hopes of Guajardo, who was one of the original negotiators of NAFTA in the early 1990s.

"I will be moderately optimistic," about getting a good deal done, Guajardo said, though acknowledging it will not be an easy renegotiation.

Related: Trump on NAFTA: Will I settle for less than I go in with? Yes'

Guajardo spoke to CNN from Washington, where he is visiting to resolve a dispute with Trump administration officials over Mexico's sugar exports to the US.

Mexico's sugar trade with the US is just one of many thorny issues both sides will confront this year as President Trump demands a "massive" renegotiation of NAFTA.

Despite Guajardo's optimism, he isn't taking Trump's threats lightly, and he's looking at other countries in the world to expand trade relationships. This year, he's already met with or announced plans to meet with officials from the European Union, China, Brazil and Argentina.

Guajardo emphasizes that Mexico's plan to diversify its economy started well before Trump. But its most recent trip to South America last week was intended to clearly a clear signal.

"We are right now negotiating with Brazil and Argentina to open new alternatives for foodstuffs in Mexico just in case things don't go the way we want them to go," Guajardo said.

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