The White House says Donald Trump could hit Mexican imports with a 20 per cent tariff, after Mexican President Enrique Pena Nieto cancelled a scheduled trip to the White House over an escalating dispute over the proposed border wall.

Key points: Donald Trump signed directives to build the wall this week

Donald Trump signed directives to build the wall this week Congress plans to move ahead with funding the wall

Congress plans to move ahead with funding the wall Mexican Foreign Minister says tariff on exports to US could make "avocados, TVs more expensive"

Mr Pena Nieto said on Twitter he had "informed the White House that I will not attend the work meeting planned for next Tuesday with the POTUS," following earlier tweets from Mr Trump suggesting the US was owed the price of the wall.

"If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting," the US President had declared on Twitter.

In a later speech, Mr Trump claimed that calling off the meeting was a mutual decision and floated a new possible threat to Mexico, which sends about 80 per cent of its exports to the US and which has vowed not to pay for a wall.

He also said: "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. We have no choice."

White House press secretary Sean Spicer said Mr Trump could impose a 20 per cent tax on imports to pay for the southern wall.

But the announcement sparked immediate confusion across Washington, and the White House tried to backtrack.

During a hastily arranged briefing in the West Wing, chief of staff Reince Priebus said a 20 per cent import tax was one idea in "a buffet of options" to pay for the border wall.

The two countries conduct some US$1.6 billion ($2.12 billion) a day in cross-border trade, and cooperate on everything from migration to anti-drug enforcement to environmental issues.

Even before the tweet cancelling the meeting, Mr Pena Nieto faced growing pressure at home to scrap the meeting over objections to the border wall.

Mexico says import tax would raise cost for US consumers

Mr Trump signed new executive orders, including one authorising the planned wall, on Wednesday just as a Mexican delegation led by Foreign Minister Luis Videgaray arrived at the White House for talks.

The timing caused outrage in Mexico, with prominent politicians and many on social media seeing it as a deliberate snub to the Government's efforts to engage with Mr Trump, who has for months used Mexico as a political punching bag.

Mr Videgaray said the summit was still on "for now".

"If you tax exports from Mexico into the United States, you're going to make things ranging from avocados to appliances to flat-screen TVs, you're going to make them more expensive," Mr Videgaray told reporters at the Mexican embassy in Washington.

Countries like Mexico would not pay such taxes directly.

Companies would face the tax if they import products made there into the US, potentially raising prices for American consumers.

Following Mr Videgaray's comments, many expressed concern online about the potential rise in avocado prices.

US-Mexico relationship 'fine', Paul Ryan says

On Thursday, leaders of the Republican-controlled US Congress said they planned to move ahead on funding the wall, which they projected would cost between $US12 billion and $US15 billion ($15 billion and $19 billion).

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"So we intend to address the wall issue ourselves and the President can deal with his relations with other countries," Senate Majority Leader Mitch McConnell said at a news conference in Philadelphia, where Republicans were holding a retreat.

Asked if politicians were worried about the US relationship with Mexico, House of Representatives Speaker Paul Ryan said, "I think we'll be fine".

Mr Trump, who took office last Friday after winning the November 8 election, ruffled feathers with Mexico from the start of his presidential campaign in 2015.

As well as promising to construct the border wall, and make Mexico pay, he claimed the country sent criminals and rapists to the United States.

Mr Trump has also threatened to penalise US companies that use Mexican manufacturing plants to produce goods for the United States.

Reuters/AP