WASHINGTON/MEXICO CITY (Reuters) – U.S. President Donald Trump said on Friday there was a “good chance” that the United States would be able to reach a deal with Mexico over his demands that it curb the number of mostly Central American migrants crossing the southern U.S. border.

But as talks in Washington stretched into a third day without a resolution, his administration said it was still pushing ahead with a plan to impose 5% import tariffs on all Mexican goods from Monday.

U.S. border officers apprehended more than 132,000 people crossing from Mexico in May, the highest monthly level since 2006, and Trump, who has railed against what he describes as an “invasion,” has threatened to impose levies rising to 25% unless Mexico cracks down.

Mexico has appeared to make some concessions, offering to send 6,000 troops to its southern border with Guatemala, but has also said it wants to see a long-term solution that would involve economic development aid.

A key sticking point in the talks is a U.S. demand that Mexico accept more asylum seekers as a “safe third country,” Mexican sources said on Friday.

Trump, who returned to Washington on Friday from Europe, struck a positive note on the progress of the talks.

“If we are able to make the deal with Mexico, & there is a good chance that we will, they will begin purchasing Farm & Agricultural products at very high levels, starting immediately,” Trump said in tweet.

“If we are unable to make the deal, Mexico will begin paying Tariffs at the 5% level on Monday!”

U.S. agricultural exports are expected to be among those hardest hit by any retaliatory tariffs imposed by Mexico, which is the top importer of U.S. corn, wheat, pork and dairy by volume.

Mexico, in turn, is an important source of fresh fruit and vegetables for U.S. consumers. Walmart’s chief executive said on Friday that the retail giant was “concerned” about produce prices if the tariffs went ahead.

Marc Short, chief of staff to Vice President Mike Pence, said earlier that while the United States was moving ahead with the tariffs, Trump could stop the process over the weekend.

“The president’s going to … look at a bunch of options, and weigh all the options over the weekend,” outgoing White House economic adviser Kevin Hassett told CNBC.

MEXICAN RALLY

Mexican President Andres Manuel Lopez Obrador said it was a mistake for the United States to link migration with trade. But he also sounded positive on the outcome of the discussions.

“It’s a good sign that talks have not broken down,” Lopez Obrador told reporters in Mexico City on Friday morning. “There is dialogue and an agreement can be reached. I’m optimistic we can achieve that.”

The veteran leftist politician is due to speak at a rally on Saturday in the border city of Tijuana about how Mexico will respond if a deal is not reached, which he said he called “to defend Mexico’s dignity.”

Mexico has prepared a list of possible retaliatory tariffs targeting products from agricultural and industrial states regarded as Trump’s electoral base, a tactic China has also used with an eye toward the Republican president’s 2020 re-election bid.

Such a move would leave the United States fighting trade wars with two of its three largest trading partners and further unnerve financial markets already nervous about a global economic slowdown.

The United States slapped up to 25% tariffs on $200 billion in Chinese imports last month, prompting Beijing to levy its own tariffs on $60 billion in American goods. Trump said on Thursday he would decide later this month whether to hit Beijing with tariffs on an additional list of $300 billion in Chinese goods.

The looming U.S. tariffs have already hurt businesses in Mexico, some of whom had hoped to benefit from the U.S.-China trade war.

“It’s very chaotic. We might be able to put up with 5% for a little bit, 10% maybe,” said Guillermo Valencia, president of Valencia International, a customs broker on the border in Nogales, Arizona. “There are very few businesses that can take a 25% increase in costs and stay alive.”

Economists say the two trade disputes could damage supply lines and pinch consumers at a time when the global economic expansion that followed the 2008 financial crisis has started to sour and the risk of recession has risen.

Even the United States, one of the more solid performers on the economic stage, would not be immune to the downdraft.

The U.S. Labor Department reported on Friday that job growth slowed sharply in May and wages rose less than expected, raising fears that a loss of momentum in economic activity could be spreading to the jobs market.

U.S. business groups are generally opposed to the tariffs, warning they will raise costs for companies and lead to higher prices for American consumers. Trump’s fellow Republicans also are not keen on the prospect of a two-front trade war.

(GRAPHIC on border apprehensions and U.S.-Mexico trade link: tmsnrt.rs/2Khd82D).