|Some fencing already exists on the 2,000-mile (3,200km) US boundary with Mexico (Getty Images)|
President Donald Trump will seek a tax on goods imported from Mexico and use these to build a border wall, White House spokesman said.
The plan was announced just after the Mexican president cancelled a visit to Washington, amid a row sparked by the question of who will shoulder the expenses for the wall.
Mr Trump on Wednesday signed an executive order to create a wall on the US southern border between the US and Mexico.
Making Mexico pay for it was one of his key election campaign promise.
But President Enrique Pena Nieto of Mexico has always insisted that will not happen and on Thursday he pulled out of next week's White House meeting.
Hours later, White House spokesman Sean Spicer told reporters that the president had discussed the funding proposal with lawmakers, and that they are considering making it part of a tax reform package the US Congress is planning.
Mr. Spicer said that a 20% tax could amass approximately $10bn (£8bn) in tax revenue per year.
"Right now our country's policy is to tax exports and let imports flow freely in, which is ridiculous", Mr Spicer said aboard Air Force One, adding that the tax will "easily pay for the wall".
The two neighboring countries exchange about $1.6bn (£1.27bn) per day in cross-border trade.
The plan is still being finalised, he explained, saying that the tax could ultimately be as low as 5%.
The White House chief of staff, Reince Priebus, later said that the border tax is only one of several options being considered.
The tension between the neighbours and trade partners has deepened just days into Mr Trump's presidency.
After Mr Pena Nieto pulled out of the summit, Mr Trump said the meeting would have been "fruitless" if Mexico didn't treat the US "with respect" and pay for the wall.
Earlier Mr Pena Nieto said he "lamented" the plans for the Border Wall.
|Republican Senator, Lindsey Graham's Twitter Posts|
Republican Senator Lindsey Graham warned that US consumers may end up bearing the cost of the proposed tax.
"Any tariff we can levy they can levy. Huge barrier to econ growth", he wrote online.
"Build that wall" was one of Mr Trump's campaign rally slogans, referring to the construction of a barrier along the 2,000-mile (3,200km) boundary.
As he signed the order at the Department of Homeland Security, he spoke of a "crisis" on the southern US border.
His executive orders also called for hiring 10,000 immigration officials to boost border patrol efforts.
"A nation without borders is not a nation," Mr Trump said. "Beginning today the United States gets back control of its borders."