Mexico warns of tariffs, spurns US aid under review by Donald Trump

An emboldened Mexico hardened its opposition to President Donald Trump on Friday by saying it would retaliate if the United States (US) imposed a border tax and that it can afford to lose financial aid that might be pulled to pay for a border wall.

Foreign Minister Luis Videgaray said Mexico could respond to any tax the United States were to unilaterally impose on imports from its southern neighbour to finance the wall with levies on select goods, aimed at US regions most dependent on exports south of the border. "Without a doubt, we have that possibility, and what we cannot do is remain with our arms crossed," Videgaray said in a radio interview. "The Mexican government would have to respond."

The statements by Videgaray and Interior Minister Miguel Angel Osorio Chong, who minimised the potential impact of the rumored loss of US security aid, toughened the defiant tone from Mexico since President Enrique Pena Nieto in January canceled a trip to meet Trump over the wall dispute.

Mexicans are angry at Trump's calls for US firms not to invest south of the border, insults to immigrants and threats to make Mexico finance the border wall. The peso currency has weakened on concerns he will hurt Latin America's No. 2 economy. Pena Nieto had faced criticism he was too accommodating with Trump but got a much needed ratings boost after cancelling the summit. A plan to deport third-country nationals to Mexico fueled outrage this week.

Mexican officials were publicly blunt with US Secretary of State Rex Tillerson and Homeland Security John Kelly over Trump's immigration and trade proposals in a visit to Mexico on Thursday. Osorio Chong told local radio that Mexican officials' rejection of Trump's bid to send non-Mexican illegal migrants from the United States to Mexico was "very clear."

"They asked us if (non-Mexican illegal immigrants) could be here while they are going through the legal process there. We said that there was...absolutely no way." Videgaray said the trade strategy would replicate a 2009 campaign of retaliatory tariffs that helped Mexico win a dispute with the United States. On Wednesday, the minister mentioned Iowa, Texas and Wisconsin as states that could be targeted in a conversation with lawmakers leaked to two newspapers. "This is not our preference," he said. "Mexico believes in free trade."

NO HANDOUTS PLEASE

A US executive order on January 25 that mandated the construction of a border wall also required government agencies to report the financial assistance they gave Mexico in the past five years, leading to speculation Trump wants to redirect the aid to pay for its construction. Osorio Chong said on Friday that Mexico had no need for such financial aid from the United States, signaling that it would not come close to paying for the estimated $21.6 billion cost of the wall.

Like in other middle-income emerging economies, many in Mexico consider it humiliating to take aid from wealthy countries. A large part of US aid to Mexico comes through the Plan Merida program, under which the US Congress allocated $2.6 billion to security assistance between 2008 and 2016.

Of that, $1.6 billion had been disbursed by November 2016, according to the US Congressional Research Service. "When they realize what's left of Merida, they will understand that it's not even that significant," Osorio Chong told local radio. "We don't object to them moving these resources... Mexico now has its own capabilities," he said.

The US Customs and Border Protection agency said on Friday it will accept proposals next month for the design of Trump's wall, a first step in picking vendors. Videgaray said a meeting of Tillerson, Kelly and Pena Nieto in Mexico City was a short courtesy visit.

He said in a more substantial meeting of the ministers, Kelly told him that deportations of undocumented immigrants from the United States would not be militarized, after Trump characterized the process as a "military operation.