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

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 restating that Mexico would not finance the wall. Hours later, President Donald Trump's spokesman, Sean Spicer, said the wall could be funded by a 20 percent import tax on goods from Mexico.

Spicer did not provide details of how the policy would be implemented or whether the tax on Mexican exports to the United States would be part of a broader import tax backed by some House Republicans. The plan would need congressional approval.

Peña Nieto had been scheduled to meet with Trump on Tuesday to discuss immigration, trade and drug-war cooperation. He called off the visit after Trump tweeted that it would be "better to cancel the upcoming meeting" if Mexico was unwilling to pay for the wall.

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 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 U.S. administrations.

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 as Trump moved to turn his campaign promises into reality.

Mexicans view a wall across the 2,000-mile border as a symbolic affront, part of a package of Trump policies that could cause the country serious economic pain. They include a crackdown on illegal immigrants, 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.

Spicer told reporters Thursday that the wall could be funded by a plan to levy a 20 percent tax on imports from countries, including Mexico, with which the United States has a trade deficit. His plan startled U.S. politicians and congressional staffers who scrambled to figure out how the idea would work.

Spicer said the plan could raise $10 billion a year.

"If you think about what a border tax on imports from countries like Mexico that we have a huge trade deficit does, that's really going to provide the funding," Spicer said, according to a pool report.

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 Caldern, said 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 if 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 a border wall, one of Trump's signature promises and a rallying cry for his supporters during last year's presidential campaign.

The timing of the order was seen as further insult: Foreign Minister Luis Videgaray was flying to Washington on Tuesday when news broke about Trump's impending border wall announcement. All day Wednesday, speculation was rampant that Pea 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 last 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.

On Wednesday night, Peña Nieto sent out a recorded message saying that he "regrets and disapproves" of the U.S. decision to move forward with the wall. He repeated that Mexico will not pay for the wall but said he still planned to come to Washington to meet with Trump because of the importance of the negotiations.

But that decision changed after Trump's tweet on Thursday morning.

During his speech at the GOP policy retreat later in the day in Philadelphia, Trump described NAFTA as a "terrible deal, a total disaster for the United States," and said that the move of manufacturing to Mexico cost millions of American jobs and the closure of "thousands and thousands of plants" across the United States.

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