Mexico and the US have agreed on the need to curb illegal migration but failed to strike a deal to avert tariffs on all Mexican exports from June 10, with talks to continue on Thursday.

“Immigration discussions at the White House with representatives of Mexico have ended for the day. Progress is being made but not nearly enough!” US President Donald Trump tweeted.

“Further talks with Mexico will resume tomorrow [Thursday] with the understanding that, if no agreement is reached, tariffs at the 5 per cent level will begin on Monday with monthly increases as per schedule,” he added.

The tariffs could rise in stages to 25 per cent by October if the US president’s migration demands are not met.

Marcelo Ebrard, Mexican foreign minister, told a news conference in Washington that he had never expected a deal to be reached after just two hours of talks, but highlighted a “willingness” on the US side to reach an agreement.

“Both sides recognised that the current situation cannot be maintained. The flows are getting too much,” Mr Ebrard said. Illegal migration has risen by a third in the past month alone.

Earlier on Wednesday, Mexico deployed police to halt a new caravan of migrants from Honduras.

However, Mr Ebrard added: “The US is looking for short-term or immediate measures . . . our position is that you have to take not [just] immediate and not [just] punitive measures.”

Mexican President Andrés Manuel López Obrador wants the US to invest in development projects in Central America. Mr Ebrard has, however, admitted that not a single project has yet been identified.

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Hopes had been rising earlier on Wednesday that an agreement could be reached quickly and Chuck Grassley, the Republican chairman of the US Senate finance committee, predicted a deal between the two countries could be announced on Thursday night.

He said Mexican officials would offer a “long list of things” to their US counterparts during the talks.

Mr Ebrard had said earlier this week that he was 80 per cent optimistic of a deal, but made clear Mexico would not accept a so-called third safe country agreement under which migrants would be forced to stay in Mexico to apply for asylum instead of the US.

Speaking in Ireland earlier on Wednesday, Mr Trump suggested there was room for a deal to be made: “Mexico, you know, wants to make a deal . . . I think they will stop [the flow of migrants and drugs]. I think they want to do something. I think they want to make a deal.” Just a day earlier, the president had defiantly predicted that the levies would take effect as planned. 

Five per cent levy would cost agricultural sector $1.4bn a year

Still, it remained unclear what sort of deal would push Mr Trump to walk away from the threat, particularly after new data from US Customs and Border Protection, which showed a sharp uptick in border apprehensions. 

During the month of May, the agency apprehended 144,258 individuals, it announced on Wednesday — a 32 per cent month-on-month increase from April, and the highest monthly figure for apprehensions in 13 years. Among the individuals apprehended, more than 100,000 were family members and children. 

Peter Navarro, the president’s top trade adviser, also suggested the tariffs could be averted. “We think that these tariffs may not have to go into effect precisely because we have the Mexicans’ attention,” Mr Navarro told news channel CNN. 

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In Washington, multiple senior Republicans have urged Mr Trump to reconsider his position. While sympathetic with the president’s view that Mexico should do more to stem the border crisis, they have argued that using tariffs to do so was misguided. 

Some Republicans have suggested they could team up with Democrats and attempt to block the measure with a veto-proof majority. However, it is unclear whether they would have the requisite two-thirds majority that such a vote would require in both chambers. 

Senator Ted Cruz, a Republican from Texas, said he supported Mr Trump’s efforts to stem the border crisis, but warned of the potential harm the tariffs would cause. “This is the wrong solution to the crisis,” he told reporters. 

Mr Trump has previously stated that tariffs are a necessary mechanism to force Mexico to take a greater hands-on role in stemming the crisis. Yet economists and trade experts have all warned of the disastrous impact tariffs would have, both for the Mexican economy and the US. 

“[Applying tariffs in full] would cause irreversible damage to the Mexican economy because we rely so much on the US economy. The US would also be shooting itself in the foot because 40 per cent of goods manufactured in Mexico are US content,” said Adriana Ibarra, a trade expert who formerly worked in the Mexican government and is now partner at law firm Baker McKenzie. 

In a further blow to Mexico’s government, rating agency Fitch downgraded Mexican sovereign debt to BBB from BBB+ and Moody’s Investors Service changed its outlook to negative from stable, citing macro fears, concerns about fragile state oil company Pemex and potential tariffs ahead.

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Via Financial Times

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