Trump drops threat to enforce tariffs on Mexico amid warnings over damage to US economy

Abrupt U-turn comes after senior Republicans raised concerns about spike in consumer prices, increase in unemployment and possible retaliatory measures

Donald Trump has dropped plans to enforce tariffs on Mexico amid dire warnings they would have seriously damaged the American economy.

The US president said he had shelved the proposals because the two countries had agreed “strong measures” on stemming the tide of illegal immigrants crossing into America from its southern neighbour.

But the abrupt U-turn also came after repeated warnings from senior Republicans that the proposed 5 per cent import tax would stall the economy, drive up consumer prices, lead to damaging retaliatory measures and imperil Mr Trump’s much-vaunted US-Mexico-Canada agreement on trade.

The reversal – announced in a tweet on Friday night – was in sharp contrast to earlier in the day when the president’s spokeswoman Sarah Sanders told reporters: “Our position has not changed. The tariffs are going forward as of Monday.”

But following Mr Trump’s social media post, the US State Department released what it called a “US-Mexico joint declaration” saying that the Central American country had agreed to expand a programme which sees asylum seekers returned there from the US while their claims are assessed.

Mexico, the statement added, will also “offer jobs, healthcare and education” to those people, while also taking “decisive action to dismantle human smuggling and trafficking organisations”.

Mexican president Andres Manuel Lopez Obrador responded by tweeting: “Thanks to the support of all Mexicans, the imposition of tariffs … has been avoided.”

He called for a gathering to celebrate in Tijuana on Saturday.

Analysts said the changes announced on immigration appeared to amount to little more than a continuation of steps the two countries had already agreed in December. These included ensuring asylum seekers wait in – or are returned to – Mexico while their cases are proceeded, something that took months to negotiate and which has since been plagued by problems, including wrong court dates and travel issues.

Mr Trump – apparently unhappy at lack of results – announced his tariff plan last week, declaring that the US would “impose a 5 per cent Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP.”

The import tax would have increased every month to a maximum of 25 per cent, he added.

Many members of Mr Trump’s own party and his business allies had urged him to reconsider — or at least postpone actually implementing the tariffs as talks continued — citing the potential harm to American consumers and manufactures.

Republicans in congress had also warned the White House that they were ready to stand up to the president and block the tariffs.

Among them was Texas senator Ted Cruz who said on Tuesday his mood was one of “deep concern and resistance”.

He added: “I will yield to nobody in passion and seriousness and commitment to securing the border, but there’s no reason for Texas farmers and ranchers and manufacturers and small businesses to pay the price of massive new taxes.”