Then-candidate Donald Trump meets with Mexican President Enrique Pena Nieto in Mexico City in August 2016. | Getty Trump risks isolating critical neighbor with Mexico feud Mexico’s rocky relationship with the U.S. underpins millions of American jobs as well as cooperation on immigration and national security.

President Donald Trump on Thursday sharply escalated his feud with the Mexican president, torpedoing a planned visit with the foreign leader next week in the first major diplomatic dust-up of his administration.

Mexican President Enrique Peña Nieto on Thursday called off his trip to Washington scheduled for next week, after Trump moved forward with his plan for a long-promised border wall and needled his southern neighbor about forcing Mexico to pay for it.


But the U.S. president tried to one-up the Mexican leader by insisting the decision not to meet was mutual.

“I’ve said many times that the American people will not pay for the wall. And I’ve made that clear to the government of Mexico,” Trump said in remarks to congressional Republicans at their retreat in Philadelphia. “To that end, the president of Mexico and myself have agreed to cancel our planned meeting scheduled for next week. 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.”

The president’s statement that the decision to cancel had been mutual came hours after Peña Nieto announced it had been his decision to call off the White House trip. “This morning we told the White House we won't attend next Tuesday's meeting with @POTUS,” Peña Nieto wrote in a series of tweets. “Mexico reiterates its will to work with the US to achieve agreements for both of us.”

The cancellation represented a stunning rebuke to Trump from a crucial neighbor whose leader is often one of the first to meet with or speak with a new U.S. president. Mexico’s seemingly deteriorating relationship with the United States underpins millions of American jobs as well as cooperation on everything from immigration and national security to counter-narcotics.

Trump, who has shown no sign of tempering his campaign's tough talk against Mexico or a hard-line immigration policy now that he is sitting in the Oval Office, continues to approach foreign policy with the flamboyant negotiating tactics he honed in real and made-for-TV boardrooms. Now, however, the consequences are far greater and could reverberate well beyond Mexico.

Other Latin American countries, who were generally pleased with how President Barack Obama treated the hemisphere, may feel the same affront as their Mexican brethren. Trump’s suggestion that he may roll back Obama’s rapprochement with Cuba would only add to Latin American grievances.

Trump's willingness to pick a fight with a southern neighbor so interconnected with the United States will likely rattle countries around the world, including longtime allies. The diplomatic breakdown comes on the eve of Trump’s first meeting with a foreign leader, British Prime Minister Theresa May.

The British leader is set to meet at the White House on Friday with an American president who personifies the populist nationalism that led last year to the United Kingdom’s vote to leave the European Union and has been dismissive of the importance of the "special relationship" between the U.S. and its oldest trans-Atlantic ally.

Trump's "America First" ethos has unnerved foreign leaders around the globe, but perhaps nowhere more than in Mexico, a nation with which Trump has pledged to get tough.

Top Mexican government officials were visiting Washington on Wednesday to hammer out plans for Peña Nieto's visit to Washington next week when Trump blindsided them the same day by signing an executive order that directs the start of construction on a physical wall along the southern U.S. border.

After pledging throughout his campaign that he would make Mexico pay for the wall, Trump continues to insist he will extract a price from Mexico for the $25 billion project, which would have to be funded by taxpayer dollars if Congress agrees to the appropriation.

Within 24 hours of Trump’s edicts, plans for next week's bilateral summit between him and Peña Nieto quickly fell apart.

Trump insisted in an interview that aired Wednesday on ABC News that Mexico will pay for the wall, albeit “perhaps a complicated form.”

He also reiterated his belief that Mexican leaders have taken advantage of the U.S. via the North American Free Trade Agreement, which he plans either to renegotiate or back out of entirely.

Peña Nieto responded by tweeting a video message Wednesday night, still adamant that “Mexico will not pay for a wall" but stopping short of calling off next week's summit. Trump volleyed back Thursday morning with a tweet of his own, suggesting that maybe the meeting was a bad idea. Peña Nieto's official announcement calling off the meeting came a few hours later.

Peter Schechter, a Latin America expert at The Atlantic Council, noted that Trump had put the Mexican president, who is deeply unpopular, in a bind. Peña Nieto was under intense domestic pressure to call off the meeting and stand up to Trump after months of being bullied.

"The new U.S. administration seems determined to increase tensions with Mexico," Schechter said. "And this means that every day is more precarious than the last for Peña Nieto.”

Aboard Air Force One en route to Philadelphia, where Trump addressed the Republican retreat Thursday afternoon, press secretary Sean Spicer said the president placed a "great importance" on America's relationship with Mexico and that Trump's Thursday morning post to Twitter was meant to suggest that "he wants to make sure that's understood that it would be part of the topics to be discussed." The press secretary's comments came before those aboard the plane were aware of Peña Nieto's decision to cancel.

On the flight back to Washington, in another major escalation, Spicer suggested a 20 percent tax on Mexican exports, measured around $50 billion annually, as a way to extract payment for the wall, even if it sparks a trade war. As a furor broke out, Spicer later clarified such a proposal was just “one idea.”

"I think part of it is he's just trolling the Mexicans," said Mark Krikorian, executive director of the Center for Immigration Studies. Krikorian has advised Trump on immigration policy but worries about actions that could damage the broader relationship between the U.S. and Mexico. "I'm uncomfortable because Mexico is the most important country in the world to us next to Canada. They're not an ally, but they're not an enemy. They cooperate with us a lot."

A U.S. diplomat familiar with Mexico warned that it is critical not to view the country solely through the lens of trade or immigration. Mexico is a vital partner on many fronts, including counterterrorism and counternarcotics.

"People need to understand, No. 1, for Mexicans broadly, just how offensive some of this is," the diplomat said.

In Latin America, “there is the sense among many that there is a racial or ethnic dimension to the targeting of Mexico, so that is certainly a source of concern throughout the region," added Christopher Wilson, a Mexico expert at the Woodrow Wilson International Center for Scholars.

Beyond triggering a wave of anti-Americanism in Mexico that might ripple deeper in Central and South America, the Trump administration's threats to back out of NAFTA entirely also carry severe economic consequences.

Such a decision could upset international supply chains that have stretched across North America in the 23 years since NAFTA was enacted and now support some 14 million American jobs that depend on trade with Canada and Mexico.

NAFTA, Trump told his party's congressional retreat, has been "a terrible deal, a total disaster for the United States from its inception." While Trump campaigned hard against trade agreements and has already backed the U.S. out of the Trans-Pacific Partnership, a 12-nation trade deal championed by the Obama administration, Republicans have traditionally supported free trade.

Notably, Trump's remarks pushing for a more protectionist agenda received decidedly softer applause than his other, more traditional red meat stances did on Thursday.

"I will not allow the taxpayers or the citizens of the United States to pay the costs of this defective transaction, NAFTA, one that should have been renegotiated many years ago except that the politicians were too preoccupied to do so. Now, these people are not in that category. You understand that. This is a different group. I think, right?" Trump said, turning his head toward Senate Majority Leader Mitch McConnell (R-Ky.) and eliciting laughter from the crowd of lawmakers.

Peña Nieto, already presiding over a fragile economy, is facing his own political pressures at home, with Andrés Manuel López Obrador — the Mexican populist known as “AMLO” who espouses separation from the United States, already polling ahead of him with the country's presidential election set for 2018.

"We don't want to energize a populist nationalist anti-Americanism in Mexico, which is embodied by AMLO," Krikorian said. "He's not exactly a Castro-ite or a Chávez-ite, but he would not be an ideal person for the U.S. to deal with."

Trump: Mexico border wall construction to begin 'in months' President Donald Trump told ABC News’ David Muir in an excerpt of an interview to air later Wednesday that the planning for his border wall is 'starting immediately.'

At their retreat in Philadelphia, Republican leaders said Congress will pass a supplemental bill before the end of September to fund the construction of the wall, putting taxpayers at least temporarily on the hook for Trump's pet project. The GOP leaders would not say whether they would cut spending or raise taxes to foot the bill for the project, which McConnell said will cost between $12 billion and $15 billion.

Trump and Peña Nieto, who met last August when Trump flew to Mexico City just before doubling down on an aggressive approach to immigration, may be more interdependent than they realize. Lawmakers are hopeful the new U.S. president will soften his stance over time.

"It's not a good start, there's no question," said Sen. Jim Risch (R-Idaho), a member of the Foreign Relations Committee, in Philadelphia on Thursday. He's optimistic the relationship will improve.

“I’ve gone through the diplomatic thing for years and years. Sometimes these things take a while to work out,” he said. “Look, Mexico is a great friend to the United States. It has been for a long time. Do we have differences? Of course, we do. We have differences with every nation. But we’re neighbors, we’re friends, they’re a huge trading partner. There’s a warm feeling between Americans and Mexico. This will work its way out.”

Seung Min Kim contributed to this report.