Trump responds: "But you cannot say that to the press. If you are going to say that Mexico is not going to pay for the wall, then I do not want to meet with you guys anymore because I cannot live with that."
He says the funding "will work out in the formula somehow. It will come out in the wash, and that is OK. From an economic issue, it is the least important thing we were talking about, but psychologically, it means something so let us just say, 'We will work it out'."
He adds: "The fact is we are both in a little bit of a political bind because I have to have Mexico pay for the wall - I have to."
Trump tells Pena Nieto that he knows "how to build very inexpensively and it will be a better wall and it will look nice".
He then offers US help in Mexico's war against drugs. Trump says: "You have some pretty tough hombres in Mexico that you may need help with, and we are willing to help you with that big league."
Trump also suggests that Mexican drugs flooding into the US have actually contributed to his election win, saying: "I won New Hampshire because New Hampshire is a drug-infested den."
Politicians in New Hampshire, including Republicans, immediately condemned the remark.