Washington has announced a five percent tax on all goods from Mexico, promising that the import tariff will gradually increase until "illegal migrants" stop coming through the country into the US.
US President Donald Trump said on Thursday that the five percent penalty on all goods imported from Mexico could increase to as much as 25 percent, unless "illegal migrants" stop coming through the central American country into the US.
The new tariffs will come into effect on 10 June.
According to a White House statement, the tariff will rise to 10 percent on 1 July, then increase by five percent increments each month, to reach 25 percent on 1 October.
The tariffs would have severe consequences for Mexico, which sends 80 percent of its exports to the United States.
The announcement came as Trump attempted to re-start the process of ratifying the new North American trade pact with Mexico and Canada -- an agreement that may now be under threat.
Tokyo stocks closed lower on Friday, after the US president announced a five percent tariff on all goods from Mexico, prompting the yen to strengthen against the dollar.