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"They thought it wasn't going to be as good as it was. So I think they look quite foolish today," Kushner told Reuters in an exclusive video interview.
Kushner worked for three years on the plan, the long-awaited details of which were revealed Tuesday by Trump at a White House press conference alongside Israeli Prime Minister Benjamin Netanyahu but no Palestinian representation.
While the peace plan has garnered support from some Western and Gulf allies - including Saudi Arabia, the UAE and the UK - it has been rejected by the Palestinian leadership.
Among the deal's widely rejected principles is the proposed Israeli annexation of West Bank settlements and the Jordan Valley, which is viewed as being completely unacceptable by Palestinians.
"One of the great ironies is they keep saying they want to be a state. If you're a state you don't call for days of rage when you don't get what you want," he added.
"This is a real moment for them to show the world are you ready to become a state or not?"
Palestinian leaders called for a "Day of Rage" over the announcement of the plan, which has been slammed as a "conspiracy" by the Palestinian Authority. Palestinians took to the streets of the West Bank and Gaza in large numbers on Wednesday, as anger erupted following the unveiling of Trump's vilified peace deal.
Read more: The 5 most outrageous proposals in Trump's bizarre 'Deal of the Century'
The proposed peace plan was developed without input from the Palestinian side and would see Jerusalem remaining Israel's "undivided capital".
Kushner, who began working on the peace plan in 2017 in a largely secretive process, told Sky News Arabia Tuesday he has read 25 books on the Israel-Palestine conflict.
Speaking to Fox News on the same day, Kushner sold the plan, saying: "Past proposals have been 2 to 3 pages - this is an over 80-page proposal with a map. Never been done before."
Kushner already unveiled an economic component of the plan in June in Bahrain, with promises of $50 billion of investment in the Palestinian territories and its neighbours.
The Palestinians boycotted the presentation, calling it a way to buy off their political aspirations.
Supporters of the White House initiative have long counted on the relationships forged by Kushner with several Gulf monarchs, as well as on the informal contacts between some Arab countries and Israel.
Their hope is that Saudi Arabia can pressure the Palestinian Authority to accept the peace plan, boosted by its economic component released in June, which anticipates $50 billion in international investments pouring into the area over 10 years.
What is the 'Deal of the Century'?
Unveiled after a three-year wait on Tuesday, Trump's so-called "Deal of the Century" claims to be an "historic opportunity" for "two states", but would see Israeli occupation of most Palestinian lands in the West Bank.
The US president claims peace plan would more than double territory earmarked for a Palestinian state and grant the future state a capital in East Jerusalem, although others have described the deal as "farcical".
Israel would be granted an "undivided" capital in Jerusalem under the deal and also be given a green light to annex the Jordan Valley - a vital zone which makes up some 30 percent of the West Bank - and Israeli settlements, which are widely considered illegal under international law.
Israel would be allowed its capital in Jerusalem with all territory west of the separation wall, including the historic old city and major Palestinian-majority neighbourhoods, whereas Palestine would be granted only areas of Jerusalem to the east of the wall.
Read More: Trump's plan leaves Palestinians no option but to reject it. Just as he intended
In return for lost territory in the occupied West Bank, the future Palestinian state would be granted territories in the sparsely populated Negev desert close to the Egyptian border. Other concessions include $50 billion worth of investment in the future state and access to two ports.
Both officials from the Palestinian Authority and protesters across the West Bank and besieged Gaza Strip have already rejected the deal, which critics say is overwhelmingly pro-Israel and will prevent the formation of a viable Palestinian state.
Maps unveiled by the White House on Tuesday reveal how the future states of Israel and Palestine would look if the deal is realised.
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