Donald Trump has announced a new 5 per cent tariff on all imported goods from Mexico unless the country’s leaders do more to stop illegal migrants entering America.
The US president said the tariff will begin within days and increase every month, hitting 25 per cent by October, unless Mexico takes action to “dramatically” reduce illegal migration.
Mr Trump said he would use powers granted to him through the International Emergency Economic Powers Act to implement the move, bypassing Congress.
“Mexico cannot allow hundreds of thousands of people to pour over its land and into our country – violating the sovereign territory of the United States,” Mr Trump said.
“If Mexico does not take decisive measures, it will come at a significant price.”
The announcement triggered fears that the price of goods such as cars, food and beer in America could rise given US importers are the ones who will pay the tariff.
It also raised questions about the renegotiated North American Free Trade Agreement [Nafta], agreed between America, Canada and Mexico last November but yet to become law. White House officials countered the first concern by saying the US economy was already being hit by the “crisis” at the southern border. They dismissed the latter by saying the new tariff was separate to the renegotiated deal.
The president’s decision, abruptly announced in a tweet and subsequent statement, was a direct challenge to the Mexican President Andres Manuel Lopez Obrador and appeared to take the Mexican government by surprise.
"I express to you that I don’t want confrontation," Mr Lopez Obrador wrote in a letter to Mr Trump. "I propose deepening our dialogue, to look for other alternatives to the migration problem."
He said "social problems are not solved with duties or coercive measures," and alluded to the United States’ history as a nation of immigrants: "The Statue of Liberty is not an empty symbol."
Click Here: cheap bluetooth headset
Mr Lopez Obrador wrote that Mexico is doing its part to avoid migration through its territory as much as possible, without violating human rights.
The Mexican leader also urged Mr Trump to "please, remember that I do not lack valor, that I am not a coward nor timorous but rather act according to principles."
The announcement rattled investors who feared that worsening trade frictions could hurt the global economy. The Mexican peso, U.S. stock index futures and Asian stock markets tumbled on the news, including the shares of Japanese automakers who ship cars from Mexico to the United States.
"We’re in a good moment building a good relationship (with the United States) and this comes like a cold shower," said Mexico’s deputy foreign minister for North America, Jesus Seade.
Mr Seade said it would be disastrous if Mr Trump goes through with his threat to impose the tariffs. Calling the move "extreme," Mr Seade said a normal response would be for Mexico to "mirror" the US tariffs but that would lead to a trade war.
Republican Senator Chuck Grassley, U.S. Senate Finance Committee Chairman, criticised Mr Trump’s move, saying: "Trade policy and border security are separate issues."
Mr Grassley, whose committee would deal with a proposed trade agreement involving Mexico, said: "This is a misuse of presidential tariff authority and counter to congressional intent." He said the proposal "would seriously jeopardise passage" of a new trade deal involving Mexico, the US and Canada.
The move comes after months of mounting frustration from the president that despite more than two years in office he has failed to drive down illegal immigration numbers.
Earlier this year Mr Trump forced out some of the most senior figures in Homeland Security, the government department which handles immigration, and indicated he wanted a tougher immigration approach.
The tariff will begin at 5 per cent on June 10 and is due to rise to 10 per cent on July 1, 15 per cent on August 1, 20 per cent on September 1 and 25 on October 1. All goods imported from Mexico will be impacted.
However the White House made clear that the first tariff and subsequent increases could be scrapped if Mexico does enough to drive down illegal border crossings into America before those deadlines.
Mr Trump said in a statement: "For decades, the United States has suffered the severe and dangerous consequences of illegal immigration.
“Sadly, Mexico has allowed this situation to go on for many years, growing only worse with the passage of time.
“From a safety, national security, military, economic, and humanitarian standpoint, we cannot allow this grave disaster to continue.”
He added: “Mexico must step up and help solve this problem.”
During a White House briefing, senior administration figures outlined some of the numbers that have alarmed the Trump administration and triggered the action.
They said that at any one time some 100,000 migrants are passing through Mexico on their way to America’s southern border.
They also cited the surge in children crossing the border, with 400 passing into America from Mexico in the last 24 hours.
Four children have died recently transiting into America, two drowning crossing a river and two dying of infections after entering the US.
Kevin McAleenan, the acting Homeland Security secretary, said: “Let me be clear – the current situation is risking the lives of children every day.”
Asked about what exactly the Trump administration wanted Mexico to do, Mr McAleenan named three specific areas where they were hoping for improvement.
They were tightening security at the Mexico-Guatemala border, targeting the criminal networks smuggling migrants across countries and “aligning” their asylum policies with those of America.
Mick Mulvaney, Mr Trump’s acting chief of staff, said he hoped the tariff increases would be avoided but insisted the president was prepared to raise them all the way if necessary.
He said: “This president will defend this nation, he will defend the southern border. If that means taking the tariffs to 25 per cent it means taking the tariffs to 25 per cent.”
Mr Mulvaney said that Republican leaders on Capitol Hill had been briefed on the measure but that “zero” Democratic congressmen were told of the move.