Mexico Approves Steep Tariffs, India Scrambles to Respond

Mexico’s Senate has approved sweeping tariff increases of up to 50 percent on 1,463 product categories, a move set to take effect from January 1, 2026. The decision targets imports from countries that do not have a free trade agreement with Mexico, placing India squarely in the firing line. For New Delhi, the vote has triggered urgent diplomatic and commercial engagement with Mexico, as exporters brace for a sharp erosion of competitiveness in one of Latin America’s most important markets.

The Policy Shift: Why Mexico Raised the Drawbridge

The tariff hike marks a decisive shift in Mexico’s trade posture. Until now, many Indian goods entered Mexico at duties ranging from zero to 15 percent. Under the new regime, rates will climb to between 35 and 50 percent for most affected products. The move is widely seen as part of Mexico’s broader industrial strategy, influenced by U.S. pressure to curb Chinese trans-shipment and ahead of the 2026 review of the USMCA trade pact.

India began flagging concerns as early as September through its embassy in Mexico City, followed by high-level discussions between India’s Commerce Secretary and Mexico’s Vice Minister for Economy. While Mexico has signalled openness to dialogue, the clock is ticking for exporters exposed to the new tariffs.

Trade at Risk: The Likely Impact on Indian Exports

The stakes are significant. India exports roughly $5.75 billion worth of goods annually to Mexico, and trade analysts estimate that nearly three-quarters of this value will face higher duties. Sectors such as textiles, garments, ceramics, auto components, and fully built vehicles are among the hardest hit.

Automobiles are particularly vulnerable. Car exports worth around $1 billion—produced by firms such as Maruti Suzuki, Hyundai, and Bajaj—could see import duties jump from 20 percent to 50 percent. For many small and medium exporters, especially in labour-intensive sectors, such margins are simply unsustainable. At a time when bilateral trade has grown to $8.4 billion, the tariff shock threatens to reverse years of incremental market access.

How an India–Mexico FTA Could Shield Exporters

A free trade agreement between India and Mexico would offer the most durable protection against these tariffs. By granting preferential or zero-duty access on a majority of tariff lines, an FTA would restore price competitiveness for Indian goods in the Mexican market.

For exporters, the benefits go beyond tariff relief. Clear rules of origin could allow Indian manufacturers to integrate into North American supply chains, using Mexico as a base for exports under the USMCA framework. This is especially relevant for auto components, engineering goods, and electronics, which face growing scrutiny and trade barriers elsewhere.

An FTA would also address non-tariff barriers by harmonising standards, improving customs procedures, and providing stronger legal protections for investment and intellectual property. In return, India would offer calibrated access to Mexican exports in areas such as electronics and pharmaceuticals, helping balance trade interests on both sides.

Strategic Calculus and the Cost of Delay

Mexico’s tariff decision reflects a more assertive, deal-driven trade strategy—one that favours partners with formal agreements. For India, failure to secure exemptions or accelerate FTA negotiations risks ceding market share to countries with preferential access, including the U.S. and Canada.

At the same time, a successful India–Mexico FTA could unlock far greater potential. Industry estimates suggest bilateral trade could scale up to $20 billion over the medium term, diversifying India’s export destinations and reducing dependence on traditional markets.

From Tariff Shock to Trade Opportunity

Mexico’s tariff hike is a wake-up call for Indian trade policy in the Americas. While short-term diplomacy may soften the immediate blow, only a comprehensive free trade agreement can provide lasting certainty for exporters. If negotiated swiftly and strategically, an India–Mexico FTA could turn a looming disruption into a platform for deeper economic integration—protecting Indian industry today while positioning it for growth across North America tomorrow.

(With agency inputs)