Mexico has approved a major tariff overhaul that is set to reshape global trade routes — and India is among the countries most affected. Starting January 1, 2026, Mexico will impose new import tariffs ranging from 5% to 50% on more than 1,400 product categories from nations that do not have a Free Trade Agreement (FTA) with Mexico. Since India and Mexico do not share an FTA, the new tariff regime will significantly impact Indian exporters across sectors.
This move is part of Mexico’s wider strategy to strengthen its domestic industries, generate additional revenue, and align with geopolitical and trade shifts in North America.
Why Mexico Is Increasing Tariffs?
Mexico’s government has cited several reasons behind its aggressive tariff hike:
1. Protecting Domestic Industries
Industries such as textiles, steel, plastics, and automobiles in Mexico have faced intense competition from cheaper imports, especially from Asian markets. The tariff hike aims to reduce this dependency and give local manufacturers a competitive advantage.
2. Securing Additional Government Revenues
With rising fiscal pressures, Mexico is targeting higher import duties to generate additional revenue for public spending and development programs.
3. Trade Alignment With the U.S.
The United States has expressed concern over Asian imports entering the North American market indirectly through Mexico. With the upcoming USMCA review, Mexico is tightening its import policies to maintain strong ties with the U.S.
Which Indian Exports Will Be Most Affected?
🔹 Automobiles and Auto Components
- Import duty on Indian cars is expected to rise from ~20% to almost 50%.
- India’s compact car exports — a strong segment in Mexico — will become more expensive.
- Nearly $1 billion of annual auto exports may be at risk.
🔹 Textiles and Apparel
- Duties on garments, yarn, and fabrics may rise to 25–35%, impacting India’s competitive pricing.
🔹 Steel, Metal & Industrial Goods
Products such as steel pipes, engineering items, and metal sheets will face higher costs.
🔹 Plastics, Rubber & Household Items
Consumer goods, packaging items, and rubber components from India will become costlier in the Mexican market.
🔹 Electronics & Machinery
Indian suppliers to Mexican factories may face reduced demand due to higher import costs.
Impact on Indian Businesses
✔ Reduced Competitiveness
Higher tariffs weaken India’s price advantage compared to countries with FTAs, like the US, Canada, and EU nations.
✔ Possible Drop in Export Volume
Sectors like auto, textiles, and metals may experience significant slowdown in shipments.
✔ Need for Local Partnerships
To continue serving the Mexican market, Indian firms may consider:
- Local assembly/manufacturing in Mexico
- Joint ventures with Mexican companies
- Exporting CKD/SKD kits to reduce tariff burden
✔ Government-to-government Talks
Indian industry groups have requested New Delhi to hold discussions with Mexico for relief or special arrangements.
India–Mexico Trade Outlook
Despite tariff challenges, India and Mexico share strong diplomatic and economic relations. Bilateral trade crosses $10 billion, and both nations continue to explore new cooperation avenues. While the new tariff policy may slow growth temporarily, long-term trade engagement between the two countries is expected to evolve with negotiations and investment.
Conclusion
Mexico’s decision to impose tariffs of up to 50% on non-FTA countries marks a major shift in its trade policy. For India, the impact will be most visible in the automobile, textile, steel, and consumer goods sectors. Exporters will need to adapt quickly through partnerships, pricing strategies, or exploring alternative Latin American markets.
The coming months will be critical as businesses and governments work to minimize disruption and chart a new roadmap for India–Mexico trade relations.
