US President Donald Trump's use of tariffs as his trump card against Mexico appears to have forced the southern neighbour to agree to restrict the wave of Central Americans transiting through it to the US border in crisis proportions.
On Friday night, the two countries announced an agreement on controlling the flow of migrants to stave off Trump's threat to impose customs duties of 5 per cent on imports from Mexico which were slated to begin on June 10 and raising it to 25 per cent by October.
Trump tweeted his decision after returning from his Europe visit for the D-Day commemoration.
"The tariffs scheduled to be implemented by the US on Monday (June 10), against Mexico, are hereby indefinitely suspended. Mexico, in turn, has agreed to take strong measures to stem the tide of Migration through Mexico, and to our southern border".
A joint declaration issued later by the two countries after several days of negotiations in Washington, said: "Mexico will take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border."
Mexico is to deploy 6,000 National Guards along its border with Guatemala and agree to the US sending some of the illegal immigrants back to wait for their asylum claims to be resolved.
"I think it's a fair balance because they had more drastic measures proposed at the start and we agreed to some middle point," Mexico's Foreign Minister Marcelo Ebrard said in Washington after the negotiations that involved US Vice President Mike Pence and Secretary of State Nike Pompeo.
Faced with unprecedented levels of illegal immigration - last month US arrested nearly 140,000 people entering the country - Trump used the threat of tariffs to get Mexico to act on the crisis.
In April, he had even threatened a complete shutdown of the border with Mexico.
Most of those coming in are from the Central American countries of Honduras, El Salvador and Guatemala, many of who marched defiantly into Mexico in caravans and ended up at the US border trying.
They claim to be fleeing gang violence or even domestic violence, rather than government repression, and seek asylum with the encouragement of activists and some Democrats. Many of them are children or families, who could claim preferential treatment.
Officials have estimated that at the current rate, the highest since 2007, the number of illegal immigrants could reach 1 million this year.
Already the facilities to hold the illegal immigrants have been stretched to the limits and recently immigration officials said that they would be suspending recreational and educational facilities for the children detained.
A novel way of deploying an economic weapon, it would have acted like a sanction, but without the full severity or political fallout.
The Mexican confrontation sets up a model of brinkmanship for the trade war with China and others, which would be painful for all: Who could bear the pain of the tariffs while inflicting it to an unbearable degree on the other.
The deal with Mexico on illegal immigration marks a win for Trump, who was soundly defeated by the Democratic-controlled House of Representatives in his bid to build the border wall that he had promised during his election campaign.
Despite forcing shutdown of the US government in December-January in his budget battle with Democrats over budget allocation for the wall, Trump had to retreat.
He later diverted funds from the defence allocation to building the border barrier and faced a court challenge that he has overcome for now.
The tariffs that Trump proposed would have affected an entire range of exports from fruits and vegetable to clothing and automobiles worth $347 billion annually. It could have had a devastating effect on the weak economy of Mexico, while pushing up the prices, especially of food, for US consumers.
Both Democrats and Republicans opposed the tariff proposal because of its likely impact on consumers and the economy.
In Mexico, the leftist President Andres Manuel Lopez Obrador found himself confronting Trump after taking office in January and having to back away from his empathy for migrants. His country is facing a migrant crisis of its own, with thousands facing a dead end camping on its side.
His government has begun issuing work permits to some.
Separately from the migration tariff threat, Trump has been trying to revise the North Atlantic Free Trade Agreement with Canada and Mexico, which he said was unfavourable to the US.
The three countries have reached an agreement on the changes but faces obstacles in the House of Representatives.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)