The US warned Mexico Thursday it needed to make more concessions on slowing migration to avoid President Donald Trump's threatened tariffs, as the Mexican leader announced he would visit the border to "defend our dignity."
Speaking as the two neighbours opened a tense day of talks -- which Trump has vowed will be the last -- White House communications chief Mercedes Schlapp said Mexico's proposals so far to slow the surge of Central Americans crossing the border were "simply not enough."
"Looks like we're moving toward the path of tariffs," she said on Fox News.
Mexican President Andres Manuel Lopez Obrador meanwhile announced he would travel to the border city of Tijuana Saturday for what he described as a "unity rally to defend Mexico's dignity and promote our friendship with the people of the United States."
That is two days before Trump's threatened tariffs on Mexican goods would take effect -- starting at five percent and rising incrementally to 25 percent by October if Mexico does not meet his expectations.
Lopez Obrador told a news conference that "all options" are under review in the event Trump goes ahead with the tariffs.
"But our posture is to preserve, above all, the friendship with the people of the United States," said the anti-establishment leftist.
"I am optimistic that an agreement will be reached." In Washington, Mexican Foreign Minister Marcelo Ebrard said he saw progress after more than two hours of talks at the State Department.
"Yes, I think we have advances today," he told reporters during a break.
Economic analysts say the impact of a five-percent tariff would likely be absorbed by losses in the Mexican peso, which has already plummeted against the dollar since Trump announced his tariff plan a week ago.
But a 10-percent tariff or higher would be painful for both countries.
Mexico sends nearly 80 percent of its exports to the United States. It is also the largest US trading partner so far this year, thanks mainly to Trump's trade war with China, which previously held the top spot.
Mexico would likely impose retaliatory tariffs, inflicting "almost immediate" pain on American consumers, said Duncan Wood, head of the Mexico Institute at the Wilson Centre in Washington.
"You identify products that are important to the most sensitive Republican districts and hope to inflict pain upon the Republican party and the president" as he heads into his campaign for re-election in November 2020, said Wood.
If the tariffs rise to 25 per cent, he added, the impact could be "catastrophic," and spread worldwide.
"It would have a recessionary impact not just on the Mexican economy but the US economy," he said.
"Mexico is the world's 13th-largest economy and one of the world's largest emerging economies. If it was to go into crisis ... there would be a spillover onto emerging markets around the world."
Mexican authorities responded to one key US demand Wednesday by blocking the latest US-bound caravan of undocumented migrants as it entered Mexico from Guatemala.
Soldiers and police halted hundreds of migrants in the group about 12 kilometres (7.5 miles) from the Guatemalan border.
About 420 migrants were taken to a detention centre, according to immigration authorities. But many others may have fled, as police initially reported some 1,200 people in the caravan -- mainly from Honduras.
US officials have insisted that Mexico halt the movement of migrants across its southern border, take action against bus lines moving them north, and overhaul its laws to force migrants to apply for asylum there rather than the United States.
The numbers of migrants reaching the US-Mexican border has surged, with 144,000 detained or blocked by US authorities in May, up 32 per cent from April.
Lopez Obrador has stressed Mexico's willingness to work with the Americans on the problem.
But Trump has appeared keen to move ahead with tariffs, despite unusually vocal opposition from Republican lawmakers.
He brushed off fears of a mutually damaging trade war.
"The higher the Tariffs go, the higher the number of companies that will move back to the USA!" he tweeted Wednesday.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)