By David Ljunggren
CALGARY, Alberta (Reuters) - Canada's Prime Minister Justin Trudeau will begin a two-day retreat with his Cabinet on Monday, focused mainly on the best approach to take with U.S. President Donald Trump, whose vow to renegotiate NAFTA could damage the Canadian economy.
Trump said on Sunday he plans talks soon on the North American Free Trade Agreement, under which Canada and Mexico send the majority of their exports to the United States.
Canadian officials, trying to persuade the new U.S. administration that focusing on Canada makes no sense, given how closely the economies are linked, say the Trump team is most concerned about large U.S. trade deficits with China and Mexico.
"They haven't said anything specific about any real problems that they have with us," said David MacNaughton, Canada's ambassador to Washington and a key player on the NAFTA file.
The danger, he told reporters on Sunday, is that Canada could suffer collateral damage from U.S. measures aimed at Mexico.
In a sign of the ties developing between the Trudeau and Trump camps, a top presidential adviser plans to hold talks in Canada on Tuesday with members of the prime minister's team, a source familiar with the matter said on Monday.
Jared Kushner, Trump's son-in-law, will travel to Calgary, Alberta, where the retreat is taking place, said the source, who asked for anonymity given the sensitivity of the matter.
Stephen Schwarzman, chief executive officer of investment firm Blackstone Group LP, has been invited to address the retreat on Monday. Schwarzman chairs ?a panel of business leaders who give Trump advice.
The challenge of dealing with Washington comes at a sensitive time for Trudeau, who is facing probes into a vacation he took with the Aga Khan as well as his centrist Liberal Party's fundraising activities.
He is also under fire from Kevin O'Leary, a television personality running for the leadership of the opposition right-leaning Conservative Party, who says Trudeau is too weak to stand up to Trump.
O'Leary complains that Trudeau, who came to power in 2015 promising to run a few years of modest budget deficits to fund infrastructure projects, has increased spending so much that finance ministry officials predict shortfalls for decades.
While polls show the Liberals well ahead of their rivals in the run-up to the 2019 election, pollster Nik Nanos of Nanos Research says O'Leary could eat into Liberal support by positioning himself as a fiscal hawk.
(Editing by Simon Cameron-Moore and Paul Simao)