WASHINGTON/MEXICO CITY (Reuters) – Mexico on Monday said 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 a blanket tariff on Mexican imports from June 10 to try 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 last week to global markets, which are already suffering from a trade war between the United States and China.

Mexican Foreign Minister Marcelo Ebrard said the country is committed to continuing to work to keep illegal immigrants from Central America from reaching the U.S. border.

However, he said 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.

“An agreement about a safe third country would not be acceptable for Mexico,” Ebrard told reporters in Washington. “They have not yet proposed it to me. But it would not be acceptable and they know it.”

Ebrard will meet U.S. Secretary of State Mike Pompeo during the talks, which will also involve other senior officials.

The negotiations 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 televisions, beer and food.

U.S.-based Mexican-themed fast food chain Chipotle Mexican Grill Inc estimated a $15-million hit from the proposed tariffs and said it could cover that by raising its burrito prices by around 5 cents.

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.

U.S. PRIORITIES?

In a possible sign of U.S. priorities in the talks, which are due to run through at least Wednesday, Department of Homeland Security (DHS) acting Secretary Kevin McAleenan said on Sunday that Mexico should deploy more personnel to stop illegal immigrants along a remote, jungly stretch of border with Guatemala.

McAleenan also said Mexico should bolster its own immigration screenings along that border, crack down on criminal networks transporting migrants and enable more migrants to wait in Mexico while they apply for asylum in the United States.

Since January, the government of President Andres Manuel Lopez Obrador has ramped up 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. Many of them are trying to escape poverty and violent crime.

Trump and fellow Republicans say something needs to be done to stem the biggest migrant surge on the border in a decade.

U.S. officials say 80,000 people are being held in custody, and the more than 100,000 mostly Central American migrants that arrived in April are overwhelming the abilities of Border Patrol officials.

In its biggest concession to Trump so far, Mexico agreed in December to receive some Central Americans seeking asylum in the United States to await the resolution of their cases.

So far now 8,835 people, have been sent into Mexico under the program, commonly known as “Remain in Mexico.”

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.

Goldman Sachs economists gave a 70% chance of the tariffs on Mexican imports coming into effect at 5% on June 10.

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. The market then went into the red after regulatory fears sent shares of internet giants Alphabet, Facebook and Amazon.com sharply lower.

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.”

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.

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, said Jesus Seade, Mexico’s deputy foreign minister for North America.

Goldman Sachs’ economists cut their chances that the new USMCA trade agreement — which needs to be passed by the three countries — will be ratified this year to 35% from 60% previously.

Trump will be out of the country on an extended trip to Europe during the talks in Washington. Several of his key advisers on immigration and trade issues are with him.

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