A diplomatic rift between the United States and Mexico widened Thursday as Donald Trump's administration suggested taxing imports from the southern neighbor to fund a border wall and Mexico's president scrapped a US visit.
Trump had been scheduled to receive Enrique Pena Nieto at the White House on Tuesday.
Instead, the Republican president is managing a foreign policy spat with a normally friendly nation and key trade partner during his first week in office.
The escalating war of words over who would pay for the proposed border wall -- a central pledge made by Trump during his successful presidential campaign -- hit the breaking point on Thursday.
"If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting," Trump said on Twitter in the morning.
Under pressure at home to cancel the trip, Pena Nieto, who had good relations with former US president Barack Obama, tweeted later that he had informed the White House that he will "not attend the working meeting" next week.
"Mexico reiterates its willingness to work with the United States to reach agreements in both nations' interests."
Hours later, Trump told Republican lawmakers at a retreat in Philadelphia that the cancellation was by mutual agreement.
"Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless, and I want to go a different route. I have no choice," he said.
White House spokesman Sean Spicer said the "lines of communications" would remain open and Washington hoped to "schedule something in the future."
- Big price tag -
But in a move that is sure to increase tensions, Spicer said Trump could fund construction of the wall -- meant to keep out illegal immigrants -- by slapping a 20 percent tax on goods from Mexico.
He later specified that it was "one idea that gets it done real easy" and that it could be part of an overall tax reform package.
Republican Senator Lindsey Graham criticized the suggestion, writing on Twitter that Mexico could retaliate with its own levy and that it would be a "huge barrier" to economic growth.
Manuel Herrera, president of Mexico's Confederation of Industrial Chambers, said the idea was "truly worrisome... not just for Mexico but for US companies, too."
Trump signed an order Wednesday for work to begin on building a wall along the 2,000-mile (3,200-kilometer) border.
But the US leader has struggled to articulate how the wall will be paid for, though he has suggested recently that the United States would fund it first and Mexico would reimburse the cost later.
During the campaign, Trump threatened to tap into remittances that Mexican migrants send home, which last year amounted to $25 billion.
Trump has also ordered officials to scour US government departments and agencies in search of "direct and indirect" aid or assistance to the Mexican government and report back within 30 days.
Republican leaders announced Thursday they would try to carve out $12-$15 billion worth of US taxpayer money for the project.
Speaking at the Mexican embassy in Washington on Thursday evening, Mexican Foreign Minister Luis Videgaray said, the idea of his country paying for the border wall was out of the question.
"The fact that it is being said that Mexico should pay for the wall is something that is simply not negotiable," Videgaray told reporters during a press conference.
- Mexican leader lauded at home -
The dispute has set off the biggest diplomatic rift in decades.
Jesus Velasco, an expert in US-Mexico relations at Tarleton State University in Texas, said the lowest previous point in relations was in 1985, when a drug cartel tortured and killed a US undercover agent.
"This is even worse," Velasco told AFP.
While Pena Nieto repeated late Wednesday that Mexico will never pay for the wall, he initially dithered on whether to travel to Washington despite pressure from Mexican politicians to stay home.
After he scrapped the trip, the unpopular Mexican leader, whose popularity is below 25 percent, was applauded by opposition leaders and other politicians.
"Bravo @EPN! Mexico deserves dignity and respect, we can't have dialogue when neither exists," former president Vicente Fox wrote on Twitter.
Around two in three Mexicans have a favorable opinion of the United States, according to Pew surveys, but anti-American and anti-Trump sentiment is not uncommon.
Pena Nieto saw his own approval rating slide late last year after he hosted Trump -- then still a White House candidate -- in Mexico City.
- NAFTA a 'one-sided deal'? -
Trump also took to Twitter to gripe about the trade gap between Mexico and the United States within the North American Free Trade Agreement, which he wants to renegotiate.
"The US has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers of jobs and companies lost," he said.
That deficit for the trade in goods is slightly higher than the overall trade deficit -- including services -- of $49 billion in 2015.
The NAFTA renegotiation could provide one way for Trump to claim victory, through increased tariffs on Mexican goods or higher border transit costs.
But it could also risk retaliatory tariffs or blowback from US firms that export $267 billion a year south of the border.