President Donald Trump says the United States will impose a five per cent tariff on all goods coming from Mexico, starting on June 10.
He said on Thursday the tariff would remain until illegal immigration is stopped.
“The Tariff will gradually increase until the Illegal Immigration problem is remedied, at which time the Tariffs will be removed,” Trump said on Twitter.
Trump said the tariff would start rising from July 1 until reaching 25 per cent on October 1, where it would remain until Mexico had “solved this problem”.
Mexican deputy foreign minister for North America Jesus Seade, meanwhile, said it would be disastrous if the tariffs were imposed.
The size of US trade with Mexico was $US671 billion ($A970 billion) in 2018.
Trump has accused the Mexican government of failing to crack down on the surge of Central American migrants who have been flowing to the US in search of asylum from countries such as El Salvador, Honduras and Guatemala.
US officials say 80,000 people are being held in custody, with an average of 4,500 arriving across the border daily.
Trump – who said he was acting under the powers granted to him by the International Emergency Economic Powers Act – campaigned for election in 2016 on a vow to crack down on illegal immigration and has been frustrated that the flow has increased in recent months.
The announcement comes as his US administration pushes for passage of the United States-Mexico-Canada Agreement, which would update the North American Free Trade Agreement.
During a visit to Canada on Thursday, US Vice President Mike Pence vowed the USMCA deal would be passed this year.