National Economic Council Director Larry Kudlow maintained a cautious optimism around the trade agreement struck by China and the U.S.

He told CNBC’s “Power Lunch” on Friday the deal should lift business confidence, but “we will see how it works. We will see if the Chinese stay with their word.”

China and the U.S. agreed on a phase one trade deal on Friday. The agreement — which both sides are aiming to sign in January — includes some tariff relief and a commitment from China to increase its purchases of U.S. agricultural products.

However, Kudlow noted that discussions over forced technology transfers — a major sticking point of the trade war since it began — may not be over along with talks about intellectual property protections.

“Regarding intellectual property rights, there’s a section in that chapter that would prevent the kind of counterfeiting among tradable goods that has been going on for years. that is clearly an unfair trading practice,” Kudlow said. “There’s a section, also in the IP area, that says plainly that if an American company is going for a license to do business that any forced technology transfers will not be used by the Chinese.”

“We will test those propositions,” he said, adding the U.S. expects China to make these changes “in good faith.”

Stocks posted small moves on Friday after investors learned the details of the phase one trade agreement. As part of the deal, China will purchase $40 billion in U.S. agricultural products.

However, Kudlow said those purchases will be made over a two-year period.

“The sense we got from the Chinese is they believe it’s doable. They’ve been in the market buying ag and other commodities let’s say as goodwill,” he said.

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