Mexico is threatening tough trade retaliation if Congress and the Obama administration move ahead with proposals that would ban Mexican truckers from travelling throughout the United States, as spelled out in the North American Free Trade Agreement (Nafta).

The pending confrontation could prove to be contentious, fraught with even more potential peril than the recent "Buy America" flap over steel, according to trade sources in Washington.

Sources confirmed that Arturo Sarukhan, Mexico's ambassador to the United States, outlined his country's trade retaliation plans at a closed-door meeting with key Washington policymakers, including...