Trump said Mexico owed 800,000 acre-feet of water to the US and demanded it release a quarter of this amount by December 31 or be hit with a new five percent tariff.

The Republican leader accused Mexico of violating a 1944 treaty under which the US shares water from the Colorado River in exchange for flows from the Rio Grande, which forms part of the border between the two countries.

"The United States and Mexico reached an understanding to meet the current water obligations of American farmers and ranchers," the US Department of Agriculture agency said in a statement.

It said the agreement includes both the current water cycle and the deficit from the previous cycle.

The two countries are expected to finalize the plan at the end of January.

The agreement as it stands would have Mexico releasing 202,000 acre-feet of water starting next week.

US Agriculture Secretary Brooke Rollins said in a statement on Friday that Mexico "has delivered more water in the last year than in the previous four years combined," but fallen short of their obligations.

"Farmers across South Texas have been reeling from the uncertainty caused by the lack of water. Now they can expect the resources promised to them," Rollins added.

Rollins echoed Trump's threat saying that if "Mexico continues to violate its commitments, the United States reserves the right and will impose five percent tariffs on Mexican products."

Mexican President Claudia Sheinbaum has not commented on the agreement, but on Tuesday expressed confidence in reaching a solution.

At the time, she also cautioned it would be physically impossible to meet the December 31 deadline because of limitations on the pumping equipment, but said: "We have the best will to deliver the amount of water that is owed."

Mexico acknowledged that it has been behind in its water deliveries to the US over the past five years, citing drought in 2022 and 2023.

Trump had previously threatened Mexico in April with economic repercussions over the water dispute, prompting Mexico at the time to immediately send water.

Mexican goods currently face a 25 percent tariff unless they fall under the United States-Mexico-Canada Agreement (USMCA), a free trade deal struck during Trump's first term and which Washington is aiming to renegotiate in 2026.