Iran’s missile test ‘not a message’ to Trump

Iran's president

DUBAI (Reuters) – Iran said on Monday a recent missile trial launch was not intended to send a message to new U.S. President Donald Trump and to test him, since after a series of policy statements Iranian officials already “know him quite well”.

Iran test-fired a new ballistic missile last week, prompting Washington to impose some new sanctions on Tehran. Trump tweeted that Tehran, which has cut back its nuclear program under a 2015 deal with world powers easing economic sanctions, was “playing with fire”.

Iranian Foreign Ministry spokesman Bahram Qasemi was quoted by Tasnim news agency as saying: “Iran’s missile test was not a message to the new U.S. government.

“There is no need to test Mr Trump as we have heard his views on different issues in recent days… We know him quite well.”

Iran has test-fired several ballistic missiles since the 2015 deal, but the latest test on January 29 was the first since Trump entered the White House. Trump said during his election campaign that he would stop Iran’s missile program.

Qasemi said The U.S. government was “still in an unstable stage” and Trump’s comments were “contradictory”.

“We are waiting to see how the U.S. government will act in different international issues to evaluate their approach.”

Despite heated words between Tehran and Washington, U.S. Defense Secretary Jim Mattis said on Saturday he was not considering strengthening U.S. forces in the Middle East to address Iran’s “misbehavior”.

Hamid Aboutalebi, deputy chief of staff of Iran’s President Hassan Rouhani, tweeted on Monday that the U.S. government “should de-escalate regional tension not adding to it”, and Washington should “interact with Iran” rather than challenging it.

Iran announced on Saturday that it will issue visas for a U.S. wrestling team to attend the Freestyle World Cup competition, reversing a decision to ban visas for the team in retaliation for an executive order by Trump banning visas for Iranians.

(Reporting by Bozorgmehr Sharafedin; editing by Ralph Boulton)

The Art of the Deal: Why Putin needs one more than Trump

woman passes billboard of Trump and Putin together

By Andrew Osborn

MOSCOW (Reuters) – In his book, ‘Art of the Deal,’ Donald Trump said the best deals were ones where both sides got something they wanted. His credo, applied to a potential U.S.-Russia deal, flags an awkward truth for Vladimir Putin: He wants more from Trump than vice versa.

As aides try to set up a first meeting between the two presidents, the mismatched nature of their respective wish lists gives Trump the edge, and means that a deal, if one is done, may be more limited and longer in the making than the Kremlin hopes.

“What the two countries can offer each another is strikingly different,” said Konstantin von Eggert, a commentator for TV Rain, a Moscow TV station sometimes critical of the Kremlin.

“The U.S. has a stronger hand. In biblical terms, the U.S. is the three kings bearing gold, while Russia is the shepherds with little apart from their good faith.”

Appetite for a deal in Moscow, where parliament applauded Trump’s election win, is palpable. The Kremlin blames Barack Obama for wrecking U.S.-Russia ties, which slid to a post-Cold War low on his watch, and with the economy struggling to emerge from two years of recession, craves a new start.

Trump’s intentions toward Moscow are harder to discern, but seem to be more about what he does not want — having Russia as a time-consuming geopolitical foe — than his so far vague desire to team up with the Kremlin to fight Islamic State.

Trump has hinted he may also push for a nuclear arms deal.

Putin’s wish list, by contrast, is detailed, long and the items on it, such as getting U.S. sanctions imposed over Moscow’s actions in Ukraine eased, are potentially significant for his own political future.

He is looking to be given a free hand in the post-Soviet space, which he regards as Russia’s back yard.

Specifically, he would like Trump to formally or tacitly recognize Crimea, annexed from Ukraine in 2014, as Russian territory, and pressure Kiev into implementing a deal over eastern Ukraine which many Ukrainians view as unpalatable.

The icing on the cake for him would be for Trump to back a Moscow-brokered Syrian peace deal allowing President Bashar al-Assad, a staunch Moscow ally, to stay in power for now, while crushing Islamic State and delivering regional autonomy.

For Putin, described in leaked U.S. diplomatic cables as an “alpha-dog,” the wider prize would be respect. In his eyes, a deal would confer legitimacy and show Russia was a great power.

But, like a couple where one side is more interested than the other, the expectational imbalance is starting to show.

Trump spoke by phone to five world leaders before talking to Putin on Jan. 28 as part of a bundle of calls. The White House readout of the Putin call was vague and four sentences long; the Kremlin’s was effusive and fifteen sentences long.

Nor does Trump seem to be in a rush to meet. Dmitry Peskov, Putin’s spokesman, said the two might only meet before a G20 summit due to take place in July.

Trump has good reason not to rush.

‘A HUGE BONUS’

With U.S. intelligence agencies accusing Moscow of having sponsored computer hacking to help Trump win office, a deal would hand fresh political ammunition to Trump’s opponents, who say he has long been too complimentary to the Russian leader.

A delay would have the added advantage of postponing a chorus of disapproval from foreign allies and Congress, where there is bipartisan determination to block sanctions relief.

For Putin though, in his 17th year of dominating the Russian political landscape, a deal, or even an early symbolic concession such as easing minor sanctions, matters.

Expected to contest a presidential election next year that could extend his time in the Kremlin to 2024, he needs sanctions relief to help lift the economy out of recession.

U.S. and EU financial sector sanctions have cut Russia’s access to Western capital markets and know-how, scared off foreign investors, and — coupled with low global oil prices — have exacerbated an economic crisis that has cut real incomes and fueled inflation, making life harder for millions.

Since Putin’s 2012 election, consumer prices have risen by 50 percent, while a fall in the value of the rouble against the dollar after the annexation of Crimea means average salaries fell by 36 percent from 2012-2016 in dollar terms.

Official data puts inflation at 5.4 percent, but consumers say the real figure is much higher, and fear of inflation regularly ranks among Russians’ greatest worries in surveys.

An easing of U.S. sanctions could spur more foreign investment, helping create a feel-good factor.

“It would be a huge bonus if it happened,” said Chris Weafer, senior partner at economic and political consultancy Macro-Advisory Ltd, who said he thought Putin wanted to put rebuilding the economy at the heart of his next term.

The economy matters to Putin because, in the absence of any more land grabs like Crimea, greater prosperity is one of the few levers he has to get voters to come out and support him.

With state TV affording him blanket and favorable coverage and with the liberal opposition still weak, few doubt Putin would genuinely win another presidential term if, as expected, he decided to run.

But for the win to be politically durable and for Putin to be able to confidently contemplate serving out another full six-year term, he would need to win big on a respectable turnout.

That, an election showed last year, is not a given.

Around 4 million fewer Russians voted for the pro-Putin United Russia party in a September parliamentary vote compared to 2011, the last time a similar election was held.

Although the economic benefits of a Trump deal might take a while to trickle down to voters, its symbolism could boost turnout, helping Putin prolong a system based on himself.

“It would be presented to the Russian people as a huge victory by Putin,” said von Eggert. “It would be described as a validation of his strategy to go to war in Ukraine regardless of the consequences and to turn the country into Fortress Russia.”

(Additional reporting by Andrey Ostroukh; Editing by Peter Graff)

Trump’s defense chief heads to Asia, eying China, North Korea threat

President Trump with Defense Secretary Mattis

By Phil Stewart and Nobuhiro Kubo

WASHINGTON/TOKYO (Reuters) – President Donald Trump’s defense secretary is expected to underscore U.S. security commitments to key allies South Korea and Japan on his debut trip to Asia this week as concerns mount over North Korea’s missile program and tensions with China.

The trip is the first for retired Marine General James Mattis since becoming Trump’s Pentagon chief and is also the first foreign trip by any of Trump’s cabinet secretaries.

Officials say the fact that Mattis is first heading to Asia – as opposed to perhaps visiting troops in Iraq or Afghanistan – is meant to reaffirm ties with two Asian allies hosting nearly 80,000 American troops and the importance of the region overall.

That U.S. reaffirmation could be critical after Trump appeared to question the cost of such U.S. alliances during the election campaign. He also jolted the region by pulling Washington out of an Asia-Pacific trade deal that Japan had championed.

“It’s a reassurance message,” said one Trump administration official, speaking on condition of anonymity.

“This is for all of the people who were concerned during the campaign that then-candidate, now-president, Trump was skeptical of our alliances and was somehow going to retreat from our traditional leadership role in the region.”

Trump himself has spoken with the leaders of both Japan and South Korea in recent days and will host Japanese Prime Minister Shinzo Abe in Washington on Feb. 10.

Mattis leaves the United States on Feb. 1, heading first to Seoul before continuing to Tokyo on Feb. 3.

DEFENSE SPENDING

Trump singled out both South Korea and Japan on the campaign trail, suggesting they were benefiting from the U.S. security umbrella without sharing enough of the costs.

In one 2016 television interview, Trump said of the 28,500 U.S. troops deployed to South Korea: “We get practically nothing compared to the cost of this. Why are we doing this?”

Mattis, in his confirmation hearing, appeared to play down those remarks, noting that there was a long history of U.S. presidents and even defense secretaries calling on allies to pay their fair share of defense costs.

But his visit to the region comes amid concerns North Korea may be readying to test a new ballistic missile, in what could be an early challenge for Trump’s administration.

Speaking with South Korean Defense Minister Han Min-koo ahead of his trip, Mattis reaffirmed a U.S. commitment to defend the country and “provide extended deterrence using the full range of U.S. capabilities.”

Analysts expect Mattis to seek an update on South Korea’s early moves to host a Terminal High Altitude Area Defense (THAAD) system, which, once in place sometime in 2017, would defend against North Korea’s nuclear and ballistic capabilities.

Still, a South Korean military official played down expectations of any big announcements during the trip, saying Mattis’ first visit would likely be “an ice-breaking session” for both countries.

In Tokyo, Mattis is to meet Defense Minister Tomomi Inada, who has repeatedly said Japan is bearing its fair share of the costs for U.S. troops stationed there and has stressed that the alliance is good for both nations.

Japan’s defense spending remains around 1 percent of GDP, far behind China, which is locked in a dispute with Japan over a group of East China Sea islets 220 km (140 miles) northeast of Taiwan known as the Senkakus in Tokyo and the Diaoyus in Beijing.

The trip also comes amid growing concern about China’s military moves in the South China Sea. Tension with Beijing escalated last week when Trump’s White House vowed to defend “international territories” there.

China responded by saying it had “irrefutable” sovereignty over disputed islands in the strategic waterway.

“What U.S. military people say is that considering the pace of China’s military build-up such as anti-ship missiles and fighters, there are worries about Japan’s capabilities,” said a senior Japanese defense ministry official, speaking on condition of anonymity.

(Reporting by Phil Stewart; Additional reporting by Linda Sieg in Tokyo, Matt Spetalnick and David Brunnstrom in Washington, and Ju-min Park in Seoul; Editing by Dan Grebler)

U.S., South Korea to defend against ‘evolving’ North Korean threat

South Korean Defence Minister

WASHINGTON/SEOUL (Reuters) – U.S. Defense Secretary James Mattis and his South Korean counterpart agreed during a phone call on Monday to strengthen their defense against “the evolving North Korean threat,” the Pentagon said, amid reports the North may be preparing a new missile test.

Mattis, who is to visit South Korea on Thursday, reaffirmed to South Korean Defense Minister Han Min-koo the U.S. commitment to defend the country and “provide extended deterrence using the full range of U.S. capabilities,” the Pentagon said in a statement.

The South Korean Defense Ministry said in a statement the two sides had agreed to deploy the Terminal High Altitude Area Defense (THAAD) system in South Korea as planned to defend against North Korea’s nuclear and ballistic capabilities.

China has objected to THAAD, saying it will destabilize the regional security balance, leading to calls from some South Korean opposition leaders to delay or cancel it.

Mattis’s visit to the region comes amid reports that the North may be readying to test a new ballistic missile in what could be an early challenge for of U.S. President Donald Trump’s administration.

The North also appears to have restarted operation of a reactor at its main Yongbyon nuclear facility that produces plutonium that can be used for its nuclear weapons program, according to a U.S. think tank.

North Korea has carried out a series of nuclear and missile tests in defiance of U.N sanctions. It conducted its fifth nuclear test in September. North and South are technically still at war because their 1950-53 conflict ended in a truce, not a peace treaty.

Mattis also met Jordan’s King Abdullah at the Pentagon and expressed his deep appreciation for Jordan’s contributions to the fight against Islamic State, the Pentagon statement said.

(Reporting by Idrees Ali and Ju-min Park in Seoul; Editing by Nick Macfie)

France, worried by Trump, promises to be defender of Iran nuclear deal

France leader saying he will continue Iran Nuclear Deal

By John Irish

TEHRAN (Reuters) – France vowed on Monday to act as defender of Iran’s nuclear deal, which U.S. President Donald Trump has threatened to tear up, but said it was imperative Tehran abide strictly by the conditions of the accord.

Arriving in the Iranian capital for a two-day visit, French Foreign Minister Jean-Marc Ayrault said it was in the “common interest” that the 2015 accord under which Tehran agreed to curb its nuclear program in return for lifted sanctions was obeyed.

During the U.S. election race Trump had branded it “the worst deal ever negotiated”, telling voters he would either rip it up or seek a better agreement.

“I’m coming as the defender of the accord, but to be vigilant and explain that they (the Iranians) must be irreproachable,” Jean-Marc Ayrault told reporters after landing in Tehran.

“We harbor real concerns about the U.S. administration’s attitude towards this agreement,” he said.

The deal was brokered by the United States, Russia, China, Britain, Germany and France. Paris took one of the hardest lines against Tehran in the negotiations, but has been quick to restore trade ties.

Major French corporations including planemaker Airbus, oil major Total and automobile manufacturers Peugeot and Renault have all signed deals.

Ayrault said that while Tehran had “largely” kept to the terms of the deal, it had pushed the spirit of the accord over the past year by carrying out several ballistic missile tests.

“We want this agreement to be respected. It is in the common interest of the international community that it is,” Ayrault said.

The foreign minister is due to meet Iranian President Hassan Rouhani, Foreign Minister Mohammad Javad Zarif and the powerful Secretary of Supreme National Security Council, Ali Shamkhani.

The visit, which includes an economic conference where some contracts may be concluded, will provide an opportunity for talks on Syria. Paris is a vociferous opponent of Iran’s backing of Syria’s leader, Bashar al-Assad.

“We will discuss our disagreements, notably on Syria. “We had hoped Iran would be less aggressive in the region,” Ayrault said, referring to the period since the nuclear deal.

On Sunday, Trump spoke by telephone with Saudi Arabia’s King Salman, a close U.S.-ally in the Middle East. A White House statement said the two leaders agreed on the need to address “Iran’s destabilizing regional activities.”

(Editing by Ingrid Melander and Richard Lough)

Trump, South Korea’s Hwang agree to strengthen defenses against North Korea: White House

South Korea leader

WASHINGTON (Reuters) – U.S. President Donald Trump and South Korean Acting President Hwang Kyo-ahn agreed to take steps to strengthen joint defense capabilities to defend against North Korea’s nuclear threat, the White House said on Sunday after a telephone call between the two leaders.

“President Trump reiterated our ironclad commitment to defend (South Korea), including through the provision of extended deterrence, using the full range of military capabilities,” the White House said in a statement.

It also said Trump and Hwang discussed the upcoming visit by the new U.S. defense secretary to Japan and South Korea, where shared concerns about North Korea will top the agenda.

The United States and South Korea have agreed to deploy a Terminal High Altitude Area Defense (THAAD) system designed to protect against North Korea’s growing nuclear and ballistic capabilities despite objections from China, which says the radar could penetrate Chinese territory.

North Korean leader Kim Jong Un said on Jan. 1 his country was close to test-launching an intercontinental ballistic missile (ICBM), and state media has said a launch could come at any time.

North Korea has maintained its nuclear and missile programs in violation of repeated rounds of international sanctions.

(Reporting by Lesley Wroughton; Editing by Lisa Von Ahn and Will Dunham)

Trump talks to Putin, other world leaders about security threats

President Donald Trump and staff

By Jeff Mason

WASHINGTON (Reuters) – President Donald Trump discussed Syria and the fight against Islamic State with Russian President Vladimir Putin on Saturday in one of several calls with world leaders that the new U.S. president used to put his stamp on international affairs.

Trump’s call with Putin was their first since the New York businessman took office and came as officials said he was considering lifting sanctions on Moscow despite opposition from Democrats and Republicans at home and European allies abroad.

Neither the White House nor the Kremlin mentioned a discussion of sanctions in their statements about the roughly hour-long call.

“The positive call was a significant start to improving the relationship between the United States and Russia that is in need of repair,” the White House said. “Both President Trump and President Putin are hopeful that after today’s call the two sides can move quickly to tackle terrorism and other important issues of mutual concern.”

Former President Barack Obama strongly suggested in December that Putin personally authorized the computer hacks of Democratic Party emails that U.S. intelligence officials say were part of a Russian effort aimed at helping Trump beat Democrat Hillary Clinton in the Nov. 8 election.

Trump’s relationship with Russia is being closely watched by the European Union, which teamed up with the United States to punish Moscow after its annexation of Crimea from Ukraine.

Trump spoke to two top EU leaders, German Chancellor Angela Merkel and French President Francois Hollande, on Saturday in addition to Japanese Prime Minister Shinzo Abe and Australian Prime Minister Malcolm Turnbull.

His call with Merkel, who had a very close relationship with Trump’s predecessor, former President Barack Obama, included a discussion about Russia, the Ukraine crisis, and NATO, the U.S. and German governments said.

Trump has described NATO as being obsolete, a comment that has alarmed long-time U.S. allies. A White House statement said he and Merkel agreed NATO must be capable of confronting “21rst century threats.”

Trump’s executive order restricting travel and instituting “extreme vetting” of visitors from seven Muslim-majority countries already puts him at odds with Merkel, whose embrace of Syrian refugees was praised by Obama even as it created political problems for her domestically.

Trump has said previously that Merkel made a “catastrophic mistake” by permitting more than a million refugees, mostly Muslims fleeing war in the Middle East, to come to her country.

In his call with Hollande, Trump “reaffirmed the U.S. commitment to NATO and noted the importance of all NATO allies sharing the burden on defense spending,” the White House said.

Hollande warned Trump against taking a protectionist approach, which he said would have economic and political consequences, according to a statement from the French president’s office.

The refugee order created confusion and chaotic scenes in airports on Saturday and largely overshadowed the news of Trump’s calls with foreign leaders, which took place throughout the day and which photographers captured in photos and video outside the Oval Office.

During his call with Japan’s Abe, Trump affirmed an “ironclad” U.S. commitment to ensuring Japan’s security. The two leaders also discussed the threat posed by North Korea. They plan to meet in Washington early next month.

Trump spoke to Australia’s Turnbull for 25 minutes and emphasized the close relationship between the two countries.

(additional reporting by Roberta Rampton, Andrea Shalal, Andrew Osborn, Alexander Winning, and Kiyoshi Takenaka; Editing by Nick Zieminski)

Police question Netanyahu for third time in criminal case

Benjamin Netanyahu

By Maayan Lubell

(Reuters) – Israeli police questioned Prime Minister Benjamin Netanyahu on Friday for the third time this month as part of a criminal investigation into abuse of office, Israeli media reported.

A police source confirmed the questioning took place but would not provide further details. A Reuters cameraman at Netanyahu’s official residence, where the questioning took place, said investigators were on the scene for three hours.

Police confirm they are questioning Netanyahu as a suspect in two criminal cases, one involving gifts given to him and his family by businessmen and the other related to conversations he held with an Israeli publisher. He has denied wrongdoing.

If charges are brought, political upheaval in Israel would be likely, with pressure on Netanyahu, 67, to step down after 11 years in office, spread over four terms.

The first case — referred to by police as Case 1,000 — involves Netanyahu and family members receiving gifts on a regular basis from two businessmen. Israeli media have reported that the gifts include cigars and champagne.

The second involves a deal Netanyahu allegedly discussed with the owner of one of Israel’s largest newspapers, Yedioth Ahronoth, for better coverage in return for curbs on competition from a free paper owned by U.S. casino mogul Sheldon Adelson.

Adelson is a supporter of the prime minister and his newspaper is staunchly pro-Netanyahu.

Israel Radio said Friday’s questioning mainly focused on the second case.

Addressing parliament on Wednesday, Netanyahu said there was nothing wrong with receiving gifts from close friends and that it was common for politicians to hold conversations with newspaper publishers. He accused opponents of trying to overthrow him.

“The goal is to pressure the attorney-general to press charges at any cost. There is no limit to the hounding, the persecution, the lies,” Netanyahu said.

In a research note published this week, Moody’s rating agency said the investigations into Netanyahu “are sufficiently serious that they could end his tenure as prime minister”.

“Should Netanyahu be forced to resign, it is likely that new elections would need to be held, since there is no clear successor in his Likud party.”

Under Israeli law, the prime minister is not obliged to resign even after he is charged, but he could be pressured into stepping down. Opponents are calling for him to do so.

Netanyahu is not the first Israeli leader to have faced criminal investigation: former prime minister Ehud Olmert was convicted of breach of trust and bribery in 2014 and Ariel Sharon was questioned while in office over allegations of bribery and campaign financing illegalities.

Israel Radio and Channel Ten television reported this week that police were investigating two more cases involving Netanyahu. Police did not confirm or deny the reports.

(Editing by Luke Baker and Dominic Evans)

Putin-Trump phone call to take place on Saturday: Kremlin

Putin

By Christian Lowe and Noah Barkin

MOSCOW/BERLIN (Reuters) – Russian President Vladimir Putin and U.S. President Donald Trump will speak by telephone on Saturday, the Kremlin said, a first step towards what Trump has billed as a normalization of relations after three years of tensions sparked by the conflict in Ukraine.

Trump will also have a telephone conversation the same day with German Chancellor Angela Merkel, and that call is expected to focus on Russia, a source in Berlin familiar with the matter said. Merkel’s spokeswoman declined to comment.

Merkel and French President Francois Hollande met in Berlin on Friday, underscoring a need for European unity in the face of growing internal and external threats, including concerns about a move toward protectionism by the United States.

“Let’s say it honestly, there is the challenge posed by the new U.S. administration, regarding trade rules and what our position will be on managing conflicts in the world,” Hollande, who will leave office after an April-May election, told reporters.

Trump has said in the past that, as part of the rapprochement he is seeking with Russia, he is prepared to review sanctions Washington imposed on Russia over its 2014 annexation of Ukraine’s Crimea Peninsula.

That move is likely to face resistance from both influential figures in Washington and foreign leaders — Merkel among them — who argue sanctions should only be eased if Moscow complies with the West’s conditions on Ukraine.

Trump and Putin have never met and it was unclear how their very different personalities would gel. Trump is a flamboyant real estate deal-maker who often acts on gut instinct, while Putin is a former Soviet spy who calculates each step methodically.

PATIENCE

Both have spoken about ending the enmity that has dragged U.S.-Russia relations to their lowest ebb since the Cold War.

“Wouldn’t it be nice if we actually got along with people? Wouldn’t it be nice if we actually got along, as an example, with Russia? I am all for it,” Trump told a news conference in July last year.

Trump is already under intense scrutiny at home from critics who say he was elected with help from Russian intelligence — an allegation he denies — and that he is too ready to cut deals with a country that many of his own officials say is a threat to U.S. security.

Putin’s spokesman Dmitry Peskov, said the Russian leader would use the call to congratulate Trump on taking office and to exchange views on U.S.-Russian ties.

Asked by reporters if Ukraine would come up, Peskov said: “This is the first telephone contact since President Trump took office, so one should hardly expect that (it)…will involve substantive discussions across the whole range of issues.

“We’ll see, let’s be patient.”

If Putin and Trump can establish a rapport, it could pave the way for deals on Ukraine and Syria, two sources of friction during the administration of Barack Obama.

For the Russian leader, there is much to gain. Putin is expected to run for re-election next year, but is hampered by a sluggish economy. A softening or removal of sanctions would allow Western investment and credit to flow in, lifting growth and strengthening Putin’s election prospects.

(Additional reporting by Polina Devitt and Denis Pinchuk in Moscow and Joseph Nasr and Andrea Shalal in Berlin; Editing by Ralph Boulton)

U.S.-Mexico crisis deepens as Trump aide floats border tax idea

boy watches as U.S. workers build wall between U.S. and Mexico

By Steve Holland and Miguel Gutierrez

PHILADELPHIA/MEXICO CITY (Reuters) – The White House on Thursday floated the idea of imposing a 20 percent tax on goods from Mexico to pay for a wall at the southern U.S. border, sending the peso tumbling and deepening a crisis between the two neighbors.

Mexican President Enrique Pena Nieto announced on Twitter around midday on Thursday that he was scrapping a planned trip to meet with U.S. President Donald Trump, who has repeatedly demanded that Mexico pay for a wall on the U.S. border.

Later in the day, White House spokesman Sean Spicer sent the Mexican peso falling to its low for the day when he told reporters that Trump wanted a 20 percent tax on Mexican imports to pay for construction of the wall.

Spicer gave few details, but his comments resembled an existing idea, known as a border adjustment tax, that the Republican-led U.S. House of Representatives is considering as part of a broad tax overhaul.

The White House said later its proposal was in the early stages. Asked if Trump favored a border adjustment tax, White House Chief of Staff Reince Priebus said such a tax would be “one way” of paying for the border wall.

“It’s a buffet of options,” he said.

The plan being weighed by House Republicans would exempt export revenues from taxation but impose a 20 percent tax on imported goods, a significant change from current U.S. policy.

“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,” Mexican Foreign Minister Luis Videgaray told reporters at the Mexican Embassy in Washington on Thursday night.

Countries like Mexico would not pay such taxes directly. Companies would face the tax if they import products made there into the United States, potentially raising prices for American consumers.

The idea is unpopular with retailers and businesses that sell imported goods in the United States. It also has met opposition from some lawmakers worried about the impact on U.S. consumers.

Trump himself appeared to pan the idea in a Wall Street Journal interview last week, saying the House border adjustment provision was “too complicated.”

Even after Trump’s comments, congressional Republicans have continued to discuss the issue with White House officials in an effort to bring them on board with the idea.

RIFT WITH MEXICO

Trump, who visited Republican lawmakers at their policy retreat in Philadelphia, told them he would use tax reform legislation to pay for the border wall.

“We’re working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the wall if we decide to go that route,” he said.

Trump, who took office last week, views the wall, a major promise during his election campaign, as part of a package of measures to curb illegal immigration. Mexico has long insisted it will not heed Trump’s demands to pay for the construction project.

He signed an executive order for construction of the wall on Wednesday. The move provoked outrage in Mexico. A planned meeting between Videgaray and U.S. Homeland Security Secretary John Kelly was canceled, a department spokeswoman said.

Videgaray said Mexico would work with Trump but that paying for the wall was out of the question.

“There are things that go beyond negotiation,” he said. “This is about our dignity and our pride.”

Pena Nieto, who had been under pressure to cancel the summit, tweeted on Thursday: “We have informed the White House that I will not attend the working meeting planned for next Tuesday with @POTUS.”

Trump had tweeted earlier that it would be better for the Mexican leader not to come if Mexico would not pay for the wall. He said later the meeting was canceled by mutual agreement.

Relations have been frayed since Trump launched his presidential campaign in 2015, characterizing Mexican immigrants as murderers and rapists. His trade rhetoric has hit the Mexican economy, causing consumers to rein in spending and foreign businesses to wait on new investments, according to the International Monetary Fund.

Trump has vowed to renegotiate the North American Free Trade Agreement with Mexico and Canada and slap high tariffs on American companies that have moved jobs south of the border.

Mexico ships 80 percent of its exports to the United States, and about half of Mexico’s foreign direct investment has come from its northern neighbor over the past two decades.

The United States runs a $58.8 billion trade deficit with Mexico, according to the latest U.S. government figures. But Mexico is also the United States’ second-largest export market.

(Additional reporting by Roberta Rampton and Ayesha Rascoe in Washington, David Morgan in Philadelphia and Frank Jack Daniel, Dave Graham and Christine Murray in Mexico City; Writing by Emily Stephenson; Editing by Alistair Bell and Peter Cooney)