US President Donald Trump has announced tariffs on all goods coming from Mexico, demanding the country curb illegal immigration into the US.
In a tweet, Mr Trump said that from 10 June a 5% tariff would be imposed and would slowly rise “until the illegal immigration problem is remedied”.
Jesús Seade, Mexico’s top diplomat for North America, said the proposed tariffs would be “disastrous”.
Mr Trump declared a national emergency at the US-Mexico border in February.
He said it was necessary in order to tackle what he claimed was a crisis at the US southern border.
Border agents say they are overwhelmed, but critics say they are mishandling and mistreating migrants.
The US president has long accused Mexico of not doing enough to stem the flow of people, and this is his latest attempt to put pressure on the neighbouring state.
Mr Seade said Mexico “must respond vigorously” if the tariffs – a tax on products made abroad – were brought in.
However, Mexican President Andrés Manuel López Obrador responded by saying he did not want “confrontation”.
“I propose deepening our dialogue, to look for other alternatives to the migration problem,” he wrote in a letter on Thursday.
During his election campaign and throughout his time in office, President Trump has sought funds to build a wall on the US-Mexico border.
He declared the national emergency at the border in an attempt to divert federal funds for a barrier wall, but a judge blocked his efforts in May.
The White House said on Thursday that the president would use the International Emergency Economic Powers Act to implement the new tariffs on Mexico.
The announcement came the same day that the White House told Congress it planned to pursue a new trade deal with Mexico and Canada.
In a White House statement, Mr Trump said the tariffs would rise by five percentage points each month until 1 October, when the rate would reach 25%.
The tariffs would stay at that level “unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory”, he said.
“For years, Mexico has not treated us fairly – but we are now asserting our rights as a sovereign nation,” the statement said.
The president also took aim at his Democratic opponents, accusing them of a “total dereliction of duty” over border security.
The Democratic-controlled House of Representatives is taking legal action to halt the Trump administration’s efforts to build a border wall, saying it would be a waste of funds and would not stop illegal immigration.
Critics say border agents are taking a heavy-handed approach under the Trump administration to controlling migration at the US-Mexico border, pointing to the deaths of six migrant children in US custody since September.