* Talks to modernize 1994 trade deal going slowly
* Elections loom in Mexico, U.S. this year
* Trump tariff proposal ratchets up pressure (Recasts with Lighthizer comments seeking deal "in principle,"adds Guajardo, Freeland comments)
By Lesley Wroughton and Sharay Angulo
MEXICO CITY, March 5 (Reuters) - Mexican and U.S. officialspushed on Monday to speed up NAFTA negotiations, with the UnitedStates floating the idea of reaching an agreement "in principle"in coming weeks to avoid political headwinds later this year.
U.S. Trade Representative Robert Lighthizer, showingimpatience at the slow pace of the talks, said Mexico'spresidential election and the looming expiry of a congressionalnegotiating authorization in July put the onus on the UnitedStates, Mexico and Canada to come up with a plan soon.
"We probably have a month, or a month and a half, orsomething to get an agreement in principle," Lighthizer toldreporters at the conclusion of a seventh round of talks tooverhaul the North American Free Trade Agreement in Mexico City.
He was speaking after meeting Mexican Economy MinisterIldefonso Guajardo and Canadian Foreign Minister ChrystiaFreeland for a joint event marked by a more cordial mood than inprevious rounds, despite major disagreements over U.S. PresidentDonald Trump's plan to impose steel tariffs.
Trump has threatened to dump NAFTA unless it boosts U.S. manufacturing and employment, arguing the 1994 accord has causedthe migration of jobs and factories southward to lower-costMexico.
Guajardo told reporters the three countries aimed to holdlower-level discussions on NAFTA over the next five weeks beforean eighth round, probably in early April.
During that period, he and his two counterparts also aimedto meet to narrow differences on the most complex issues in thetalks, which include agreeing on new auto content rules, adispute-resolution mechanism and agricultural market access.
Lighthizer said time to rework the deal was running "veryshort" and again raised the possibility of the United Statespursuing bilateral deals with its partners - albeit stressingthat his government would prefer a three-way agreement.
He said the United States was making more headway with itssouthern neighbor than with Canada.
Freeland declined to give details on a prospective timelinefor the next round and said alongside Lighthizer that Trump'splan to impose a 25 percent tariff on steel imports and a 10percent tariff on aluminum imports was "unacceptable".
The U.S. trade promotion authority, or TPA, is authorized byCongress and is needed to implement legislation for new tradeagreements such as the renegotiation of NAFTA. The TPA expireson July 1 and analysts expect it to be extended.
The United States also holds congressional elections inNovember.
TARIFF EXEMPTION LURE
Early on Monday, the U.S. president ratcheted up tensionbefore the ministerial meetings in Mexico by tweeting that"Tariffs on Steel and Aluminum will only come off if new & fairNAFTA agreement is signed." said that meant Canada and Mexico would enjoytariff exemptions once a NAFTA deal was reached, calling thetariffs an "incentive" to conclude the talks.
Canada and Mexico say they should be exempted from suchmoves, and have warned they could retaliate.
Guajardo said there would be no concessions made in theNAFTA negotiations to placate Trump on steel and aluminum, whileFreeland said the two issues were separate.
Guajardo urged all sides, however, to avoid a trade war andsaid Mexico would wait for a U.S. decision. If the United Statesdid impose tariffs, a response should be tailored to the sectorin question to avoid complicating other issues, he added.
"Contaminating strategies just ends up making you escalatethe nature of the conflicts," Guajardo said.
Talks to overhaul the 24-year-old pact are moving slowly, inpart because Canada and Mexico have resisted U.S. demands toboost the North American content of autos produced inside NAFTA.
When asked about the discussions on the rules of origin forautos, Guajardo noted that no trade deal could depend only onthe interests of one particular sector.
Although Mexico holds its election in July, it will notchange governments until December, and Guajardo pledged to keepnegotiating for as "as long as necessary" while PresidentEnrique Pena Nieto's administration is in office.
Lighthizer said only six chapters had been concluded sincetalks began in August. Negotiators are working on 30 chaptersoverall, he said, including a new one on energy.
Uncertainty over the talks, and the potential for a widerglobal trade war, are making investors nervous.
During the latest round, negotiators concluded talks onrules governing food safety and animal health, good regulatorypractices, plus administration and publication, officials said.