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WRAPUP 3-U.S. on track to impose tariffs on Mexico as migration talks resume

Makini Brice and Anthony Esposito

(Adds comment from customs broker in Arizona in paragraph 16)

* U.S. edges closer to imposing tariffs on Mexican goods

* Negotiators start third day of talks on migration issue

* Russia's Putin accuses U.S. of "economic egoism"

WASHINGTON/MEXICO CITY, June 7 (Reuters) - The Trump administration pushed ahead on Friday with a plan to slap a 5% tariff on imports from Mexico, as the two sides started a third day of talks to reach a deal to stem the flow of mostly Central American migrants into the United States.

U.S. President Donald Trump has threatened to impose the levies starting on June 10 if Mexico does not agree to seriously tackle the migration problem. Apprehensions at the U.S.-Mexico border hit a decade high in May.

"Our position is still the same and we're moving forward with the tariffs," White House press secretary Sarah Sanders told reporters in Ireland as Trump prepared to return home from a European trip.

"The meetings have gone well but we're still on track for tariffs on Monday," she said.

Marc Short, chief of staff to U.S. Vice President Mike Pence, said the United States would move ahead with a legal notification of the tariffs on Mexican goods. "You should anticipate that happening today," he said at the White House.

Trump, who has railed against what he describes as a surge of migrants across the U.S.-Mexico border, has warned that the initial tariffs on Mexico will be incrementally increased each month up to 25% if a migration deal fails to materialize.

Mexico, whose economy is heavily dependent on trade with the United States, is scrambling to avoid such a scenario.

"It's a good sign that talks have not broken down," Mexican President Andres Manuel Lopez Obrador told reporters in Mexico City. "There is dialogue and an agreement can be reached. I'm optimistic we can achieve that."

Lopez Obrador, however, said it was a mistake for the United States to link migration with trade.

Mexico has prepared a list of possible retaliatory tariffs targeting U.S. products from agricultural and industrial states regarded as Trump's electoral base, a tactic China has also used with an eye toward the 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 a revised target list of $60 billion in American goods.

U.S. officials officially granted Chinese exporters two more weeks to get their products into the United States before the higher tariffs were applied, according to a U.S. government notice posted online on Friday.

Trump said on Thursday he would decide later this month whether to carry out his threat to hit Beijing with tariffs on an additional list of $300 billion in Chinese goods.

'ECONOMIC EGOISM'

The looming U.S. tariffs have caused businesses in Mexico to scramble to get their products into the United States.

"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 in Nogales, Arizona. "There are very few businesses that can take a 25% increase in costs and stay alive."

Economists say the trade disputes could damage key 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.

Trump's tariff threat against Mexico also has cast a cloud over the United States-Mexico-Canada Agreement, a trade deal that was meant to replace the North American Free Trade Agreement. The three countries have not yet ratified USMCA.

Credit ratings agency Fitch downgraded Mexico's sovereign debt rating on Wednesday, citing the trade tensions among other risks, while Moody's lowered its outlook to negative.

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 American labor market.

Global equities rose on the prospect that central banks, including the U.S. Federal Reserve, would have to loosen monetary policy to offset the trade frictions and the threat of recession.

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.

But Trump is eager to show progress on his 2016 campaign pledges to take a hard line on immigration and rebalance global trade in favor of the United States as part of his "America First" agenda.

Trump's protectionist approach has angered key U.S. trading partners and prompted rebukes from foreign leaders.

Speaking at an economic forum in St Petersburg, Russian President Vladimir Putin accused the United States on Friday of "unbridled economic egoism" and said Washington's tactics would lead to trade wars and "maybe not just trade wars."

Chinese President Xi Jinping, speaking at the same event, called on world powers to protect the global multilateral trade system. (Reporting by Susan Heavey, Makini Brice and Doina Chiacu in Washington, Lisa Baertlein in Los Angeles, Anthony Esposito in Mexico City, Steve Holland in Shannon, Ireland, and Andrey Ostroukh and Katya Golubkova in St Petersburg Writing by Paul Simao Editing by Susan Thomas)