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(CNN) —  

Larry Kudlow, President Donald Trump’s top economic adviser, said Sunday there is a “strong possibility” Trump will meet Chinese President Xi Jinping at the G20 economic summit in Japan next month and said he expects China to retaliate against the US for its increase last week in tariffs on Chinese goods as Beijing has indicated it would.

“We were moving well, constructive talks – and I still think that’s the case … but the problem is, two weeks ago in China, there was backtracking by the Chinese,” Kudlow told Fox News’ Chris Wallace on “Fox News Sunday.”

He said, “I think I do,” when asked whether US officials expect the Chinese to retaliate for the tariff hike put on by the US last week when it increased the rate to 25% on $200 billion of Chinese goods.

“We may know more today or even this evening or tomorrow,” Kudlow said of the expected retaliation. “We’ll see what they come up with.”

Contrary to the President’s suggestions that the Chinese alone will pay the tariffs imposed by the US, Kudlow acknowledged US companies would pay in effect a tax increase that oftentimes is passed on to consumers, but he added that “both sides will pay” because both nations’ economies will feel some impact from the duties.

He argued, though, that the tariffs would have a “very modest” impact on US economic growth and said the tariffs have increased customs revenues.

Pressed further by Wallace about the President’s comments regarding China paying the tariffs and whether it’s US businesses and consumers who pay, Kudlow said: “Yes, to some extent. I don’t disagree with that. Again, both sides … both sides will suffer on this.”

“The economic consequences are so small but the possible improvement in trade … this is worthwhile doing,” he said.

Kudlow confirmed that no new talks with Chinese negotiators have been scheduled, but he said US Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin have been invited to return to China for more discussions.

A “sticking point,” Kudlow said, is the desire from the US side to see China commit to changes more forcefully – such as by codifying them into Chinese law, not simply stating their intention to commit.

Kudlow told Fox that the chances are “probably pretty good” that Trump and Xi could speak in person at the G20.

Still, he refused to put a timeline on reaching a deal and said there is still much work to be done before the two countries can arrive at an agreement.

“We don’t think the Chinese have come far enough,” Kudlow said.