By Alexandra Alper
WASHINGTON (Reuters) - Mexico on Monday made clear it would reject a U.S. idea to take in all Central American asylum seekers if it is raised at talks this week with Trump administration, which has threatened to impose tariffs if Mexico does not crack down on illegal immigration.
President Donald Trump last week said he will impose tariffs on all Mexican imports from June 10 as a way to pressure Mexico to tackle large flows of mostly Central American migrants passing through on the way to the United States.
The threat was a shock to global markets, which are already suffering from a trade war between the United States and China.
Speaking to reporters in Washington before this week's meetings, Mexican Foreign Minister Marcelo Ebrard said the country is committed to continuing to work to keep illegal immigrants from Central American from reaching the United States border.
However, a more radical proposal favored by some U.S. officials to designate Mexico a "safe third country," which would force Central Americans seeking asylum in the United States to instead seek that status in Mexico, is not an option, he said.
"An agreement about a safe third country would not be acceptable for Mexico," Ebrard said. "They have not yet proposed it to me. But it would not be acceptable and they know it."
The talks in Washington will be closely watched by financial markets concerned that import tariffs would ultimately hit the U.S. economy by adding to the cost of a wide range of goods in the United States, from Mexican-made cars and auto parts to beer and avocados.
U.S. business groups have opposed the tariff plan and the influential U.S. Chamber of Commerce is looking at ways to challenge it, including legal options.
MEXICAN ECONOMY
The Mexican economy which is heavily reliant on exports to the United States, shrank in the first quarter and would reel under U.S. levies that would start at 5% but could reach as high as 25% this year under Trump's plan.
U.S. stock index futures fell on Monday as the multi-front trade war made investors increasingly risk averse and fueled worries of a recession, although the market ticked higher, propped up by healthcare stocks.
Trump, who has embraced protectionism as part of an "America First" agenda aimed at reshaping global trade, said in a tweet last Thursday that he would ratchet up tariffs on Mexico "until the Illegal Immigration problem is remedied."
Since January, the government of Mexican President Andres Manuel Lopez Obrador has ramped up migrant detentions and deportations, but that has not been enough to stop the growing tide of families reaching the United States, mainly from Guatemala and Honduras.
In May, numbers are expected to have outpaced the 99,000 people apprehended at the U.S. border in April, with many of those crossing in groups of families who will mostly be released to await asylum hearings in the United States.
Mexican officials in Washington on Monday warned that the tariffs could backfire, fanning further migration by hammering regional economies.
"Tariffs, along with the decision to cancel aid programs to the northern Central American countries, could have a counterproductive effect and would not reduce migration flows," Mexico's ambassador to the United States, Martha Barcena, told the news conference.
The tariffs also "could cause financial and economic instability," reducing Mexican authorities' capacity to address migration flows and "offer alternatives" to migrants fleeing Guatemala, El Salvador and Honduras, she said.
Approval of a deal to revamp the NAFTA free trade agreement between Mexico, the United States and Canada is also pending and could be hampered by the latest dispute over immigration, Mexican authorities said.
Jesus Seade, Mexico's deputy foreign minister for North America described the imposition of tariffs on Monday as a "stumbling block" that puts at risk passage of the trade deal.
The talks in Washington come as Trump is out of the country on an extended trip to Europe. Several of his key advisers on immigration and trade issues are with him, including Treasury Secretary Mnuchin, acting White House chief of staff Mick Mulvaney, and immigration adviser Stephen Miller.
The discussions will include a meeting of Mexican Agriculture Minister Victor Villalobos and U.S. Agriculture Secretary Sonny Perdue on Monday, Mexican officials said.
U.S. Trade Representative Robert Lighthizer and acting U.S. Homeland Security Secretary Kevin McAleenan also are expected to participate in talks, Mexican officials said.
Mexican Economy Secretary Graciela Marquez and U.S. Commerce Secretary Wilbur Ross will meet this week, as will Ebrard and U.S. Secretary of State Mike Pompeo.