WASHINGTON: US President Donald Trump escalated his surprise tariff threats against Mexico on Friday, triggering alarm about the likely economic fallout, spooking global markets and raising the prospect of US trade wars on multiple fronts.
Trump announced his readiness to levy tariffs on all Mexican imports, beginning at five percent starting June 10 and rising to as high as 25 per cent in coming months until Mexico substantially reduces the flow of illegal immigration.
Mexico's President Andres Manuel Lopez Obrador said early Friday that his country was "doing our job" to stop the flow of undocumented migrants to the United States, and warned Trump that hitting his neighbor with tariffs would be a lose-lose game.
But the US president only doubled down on his threats of punishment, saying in a new flurry of tweets that "Mexico has taken advantage of the United States for decades."
The impact of new tariffs would be devastating for Mexico, which sends 80 percent of its exports to the US.
Lopez Obrador reminded his American counterpart the tariffs would also take a heavy toll on the United States, whose largest trading partner so far this year is Mexico -- thanks mainly to Trump's trade war with China.
Earlier this month Trump, angered by what he deemed unfair Chinese trade practices, Trump raised punitive duties on USD 200 billion in Chinese imports from 10 to 25 per cent.
Beijing has promised retaliation.
The Mexico tariffs would exacerbate US trade tensions, with the effects rippling across multiple economic sectors, including the automobile industry and agriculture.
"No good can come of coercive measures. These (tariffs) would not be good for Mexicans, but they would not be good for Americans either," said Lopez Obrador.
He said his government would act prudently, adding he had already sent a delegation to Washington for talks, led by Foreign Minister Marcelo Ebrard.
Lopez Obrador refrained from mentioning possible retaliatory measures.
But Mexico's top diplomat for North America said Thursday the country would respond "vigorously" if Trump followed through.
Trump only stepped up his Twitter attacks.
"Mexico must take back their country from the drug lords and cartels. The Tariff is about stopping drugs as well as illegals!" he fumed.
On Wall Street, the Dow Jones Industrial Average was down 1.1 per cent at mid-day.
In Tokyo, shares closed down 1.6 per cent, with losses led by automakers with operations in Mexico.
European markets were also hit.
The Mexican peso lost 2.6 per cent against the dollar.
The announcement came the same day Trump started the process of ratifying the new North American trade pact with Mexico and Canada, the USMCA -- an agreement that now may be under threat.