White House says Mexico border wall might be funded by tax on imports

MEXICO CITY – A deep rift opened Thursday between the United States and its southern neighbor as the Trump administration pressed forward with a plan for a giant border wall and insisted that Mexico would pay for it, possibly through a U.S. tax on imports.

President Enrique Peña Nieto on Thursday called off a trip to Washington after emphasizing that Mexico would not finance the wall. Hours later, Trump's press secretary, Sean Spicer, said the border barrier would be funded by a 20 percent import tax on goods from Mexico.

Spicer did not provide details of how the policy would work. Later, he appeared to backtrack, telling reporters that the tax was "one idea" to pay for the wall and that his intent was not to "roll out" a new policy. He said it could be part of a broader import tax plan backed by some House Republicans.

Critics said that if implemented, such a tax would mean that the wall's cost ultimately would be borne by U.S. consumers.

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Peña Nieto had been scheduled to meet with Trump on Tuesday to discuss immigration, trade and drug-war cooperation. But the Mexican leader came under intense political pressure at home after Trump signed an executive order on Wednesday launching the border-wall plan. The Mexican president called off the visit after Trump tweeted Thursday morning that it would be "better to cancel the upcoming meeting" if Mexico was unwilling to pay for the barrier.

Trump's moves have rekindled old resentments in Mexico, a country that during its history has often felt bullied and threatened by its wealthier, more powerful neighbor. The legacy of heavy-handed U.S. behavior – which includes invasions in the 19th and 20th centuries and the seizure of significant Mexican lands – has mostly been played down by a generation of Mexican leaders who have pursued pragmatic policies and mutual economic interests with both Republican and Democratic administrations in the United States.

Both Peña Nieto and Spicer said their countries were interested in maintaining positive relations. "We will keep the lines of communication open," Spicer told reporters in Washington on Thursday morning, adding that the White House would "look for a date to schedule something in the future." The Mexican president tweeted that his government was willing to work with the United States "to reach agreements that benefit both nations."

But Mexicans expressed shock and dismay that Trump's campaign promises could be moving toward reality.

Mexicans view a wall along the 2,000-mile border as a symbolic affront, and as part of a package of Trump policies that could cause the country serious economic pain. They include a crackdown on immigrants illegally in the United States, who send billions of dollars home, and renegotiation of the North American Free Trade Agreement, or NAFTA.

The treaty has allowed trade between the neighbors to mushroom. Every day, goods valued at $1.4 billion cross the U.S.-Mexico border, and millions of jobs are linked to trade on both sides. Mexico is the world's second-largest customer for American-made products, and 80 percent of Mexican exports – automobiles, flat-screen TVs, avocados – are sold to the United States.

The import tax idea floated by Spicer, which he claimed could raise $10 billion per year to pay for the wall, could be met by retaliatory action from Mexico.

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Mexico's economy secretary, Ildefonso Guajardo, said this week that Mexico is prepared to "mirror" any action by the United States to raise tariffs or impose taxes on imports. Guajardo has also said it might be necessary for Mexico to walk away from NAFTA – a once-unthinkable idea – if there was no benefit in the negotiations for his country.

"If we are going to go for something that is less than what we have, it makes no sense to stay," he said.

In his remarks late Thursday aiming to clarify the Trump administration's plans, Spicer said that the wall could be funded by a tax on imports from countries with which the United States has a trade deficit – like Mexico.

"The idea is to show that generating revenue for the wall is not as difficult as some might have suggested. One measure alone could do this," he told reporters.

He said that the tax plan was in the "early stages" and that the actual number, "instead of 20 percent, it could be 18, it could be 5."

In Mexico, politicians and analysts railed against Trump's plans for the wall and a major crackdown on immigration, as well as a renegotiation of NAFTA.

"When we are talking about building a wall, about deporting migrants, about eliminating sanctuary cities (for migrants), about threatening to end a free-trade agreement, or to take away factories, we are really talking about causing human suffering," Margarita Zavala, a possible candidate for the presidency in 2018 and the wife of former president Felipe Calderón, said Thursday in an interview. "And after today, without a doubt, it is very difficult to negotiate from behind a wall."

Mexicans said they had trouble recalling a time when relations were this bad with the United States or when an American president appeared to be such a threat to Mexico's core interests.

"Never," former president Vicente Fox said in an interview, when asked whether Mexico had faced a comparable U.S. president in his lifetime. "And I never thought the U.S. people would go for a president like this."

"We don't want the ugly American, which Trump represents: that imperial gringo that used to invade our country, that used to send the Marines, that used to put and take away presidents most everywhere in the world," Fox added. "That happened in the 20th century, and this is what this guy is menacing us with."

Trump, for his part, faulted the Mexicans for damaging the relationship.

Addressing a GOP policy retreat in Philadelphia, Trump said Thursday afternoon, "The president of Mexico and myself have agreed to cancel our planned meeting" next Tuesday. "Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless," he added.

Peña Nieto's decision to cancel the trip came a day after Trump signed an executive order to construct the border wall, one of Trump's signature promises and a rallying cry for his supporters during last year's presidential campaign.

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The timing of the order was seen as a further insult: Foreign Minister Luis Videgaray was flying to Washington on Tuesday when news broke about the impending border wall announcement. All day Wednesday, speculation was rampant that Peña Nieto might cancel his upcoming trip.

In the meantime, Videgaray met at the White House with Craig Deare, who is in charge of Latin America on the National Security Council.

Throughout Trump's rise, Peña Nieto has been mostly respectful toward him, even inviting him to visit Mexico City as a candidate in August. Peña Nieto has tried to maintain a diplomatic approach to the new administration, suggesting that Mexico can negotiate with its largest trading partner and preserve good relations.

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Philip Rucker, Kelsey Snell, Karen DeYoung, William Branigin and Jenna Johnson in Washington and Gabriela Martinez in Mexico City contributed to this report.