Taxing: Clamp down on migrants or face tariffs - Trump tells Mexico
President only 'effective action' can avert escalation of import levies, as markets react with the jitters
Donald Trump yesterday demanded Mexico act to fix problems with immigration, or face escalating tariffs on its goods.
The US president's call for Mexico to "finally do what must be done" was announced on Twitter and in a later statement.
The direct challenge to President Andres Manuel Lopez Obrador took the Mexican government by surprise on a day when it had started a formal process to ratify a trade deal with the US and Canada (USMCA).
"If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the tariffs will be removed," Mr Trump said.
The tariff measures against Mexico open up a new front on trade and if implemented are bound to trigger retaliation that would hit heartland, Trump-supporting farming and industrial states.
Higher tariffs will start at 5pc on June 10 and increase monthly up to 25pc on October 1, unless Mexico takes immediate action, Mr Trump said.
Mr Lopez Obrador said he would respond with "great prudence" to the threats to slap tariffs on Mexican goods entering the US, and called on Mexicans to unite to deal with the challenge. He said his foreign minister, Marcelo Ebrard, would be in Washington tasked with convincing the US government that Trump's measures were in neither country's interest.
The new crisis rattled investors who fear friction between the US and its biggest trade partner for goods could hurt the global economy. The Mexican peso, US stock index futures and Asian stock markets tumbled on the news.
In a letter posted on Twitter, Mr Lopez Obrador responded, calling Trump's policy of America First "a fallacy" and accusing him of turning the United States into a "ghetto" that stigmatised migrants.
He pushed back against Mr Trump's assertion that Mexico let immigration happen, saying: "You know we are fulfilling our responsibility to stop (migrants) moving through our country, as much as possible and without violating human rights."
Determined to avoid a break down in Mexico's most important trade relationship, its government has drastically tightened controls on movement of migrants, detaining and deporting thousands in recent months.
Despite Mr Trump's assertion that Mexico could easily end Central American immigration, its relatively small security forces, struggling with a record level of gang violence and homicide, are having a hard time controlling the flows.
In the biggest migrant surge on the US-Mexican border in a decade, officials say 80,000 people are in custody with an average of 4,500 mostly Central American migrants arriving daily.
Before unveiling his tariff threat, Mr Trump posted a video purporting to be of 1,036 migrants illegally crossing from Mexico on Wednesday. Officials said it was the largest group since October.
A source close to him said there had been a debate inside the White House over whether to go forward with the policy. Mr Trump sided with the hawks.
"The last thing he wants is to look weak," said the source.
Mr Trump's directive also means potential chaos in his efforts to get Congress to approve the USMCA deal.
Doug Ducey, the Republican governor of Arizona, which shares a 595km border with Mexico, said on Twitter that he had spoken to the White House and it was time for Congress to act on border security.
Mr Ducey, normally an outspoken supporter of free trade, faced criticism for the potential damage to his state's economy.
"Everyone knows I am opposed to tariffs and deeply value Arizona's relationship with Mexico," he wrote on Twitter. "I prioritise national security and a solution to our humanitarian crisis at the border above commerce."
Mr Trump said he was acting under powers granted to him by the International Emergency Economic Powers Act.
Jaime Serra, Mexico's former trade minister who negotiated the North American Free Trade Agreement which USMCA replaces, said Mr Trump's announcement was "unacceptable".
White House acting chief of staff Mick Mulvaney asked which products from Mexico could be affected by the tariffs, said: "All of them."