US President Donald Trump wants a new 20 per cent tax on all imports from Mexico to pay for a wall on the southern US border.

No details were available on how the tax would work but White House spokesman Sean Spicer told reporters on Thursday that Trump wanted it to be part of a tax reform package that the US Congress is contemplating.

Senate Republican leader Mitch McConnell says Congress is moving ahead with the wall that would cost $US12 billion to $US15 billion ($A16 billion to $A20 billion).

McConnell and House of Representatives Speaker Paul Ryan did not say how Congress would pay for the wall.

“We anticipate a supplemental (budget) coming from the administration,” Ryan said at a news conference.

“The point is we’re going to finance the Secure Fence Act.”

Earlier, it seemed Mexican President Enrique Pena Nieto has had enough.

After Mr Trump tweeted that his counterpart should cancel his upcoming visit to Washington if Mexico refuses to pay for a wall along the border – Mr Pena has done exactly that.

He released a statement – also on Twitter – saying Mexico had informed the White House that he would not attend the meeting scheduled for next Tuesday.

“Mexico reiterates its willingness to work with the United Nations to achieve agreements in favour of both nations,” he said.

In another Tweet he said: “Mexico offers and demands respect as a fully sovereign nation.”

Mr Trump addressed the issue while speaking in Philadelphia ahead of a Republican party retreat.

“Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be futile and I want to go a different route,” he said. “I have no choice.”

This is a major set–back for Mexican–American relations.

Earlier Mr Trump said: “The US has a 60 billion dollar ($A80 billion) trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers… of jobs and companies lost.

“If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting,” Trump said on Twitter on Thursday.

The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers…

— Donald J. Trump (@realDonaldTrump) January 26, 2017

of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.

— Donald J. Trump (@realDonaldTrump) January 26, 2017

The tweet came after Mexican Economy Minister Ildefonso Guajardo said his talks in Washington DC with a key trade adviser to Trump over the future of bilateral commerce had shown the US side was receptive to Mexico’s point of view.

Guajardo told Mexican television he had held long talks with Trump trade adviser Peter Navarro on Wednesday on how the two countries should seek to modernise the NAFTA trade agreement sensibly, and how to avoid obstacles to free trade.

The talks had shown the US side was receptive to what Mexico had to say, Guajardo said.

Mr Trump’s tweets sparked an angry response from former Mexico President Vicente Fox, who told CNN, “We will not pay for that f***ing wall”.

.@VicenteFoxQue: I've told Trump that "Mexico will never pay for that f—ing wall" and now I have to repeat it https://t.co/KqbjvzXAdI

— CNN (@CNN) January 26, 2017

The issue also comes to a head a time when illegal immigration from Mexico is at a 40 year low.

Donald Trump is building a wall on the Mexico border as undocumented crossing hits a 40-year low https://t.co/S0q2VwDv9M pic.twitter.com/jViAomp1fg

— Heather Timmons (@HeathaT) January 26, 2017

Mr Trump can’t magic up the funding of an estimated $US12 to $US15 billion ($A16 – $A20b) needed for the project simply by signing an executive order – but he appears to have the support he needs.