Explained: How Mexico’s Tariff Hike Could Impact India’s $5.7 Billion Export Market

Mexico has announced a steep tariff hike of up to 50 per cent on imports from countries that do not have preferential trade agreements with it, including India.

The higher duties will come into force from January 1, 2026, even as New Delhi and Mexico City move closer to initiating talks on a proposed free trade agreement (FTA).

The unilateral move targets a wide range of products, with analysts flagging automobiles, auto components, textiles, apparel, plastics, steel, metals and footwear as the most affected sectors. In total, Mexico plans to raise import duties across around 1,463 tariff lines, with rates ranging from about 5 per cent to as high as 50 per cent. However, the final list of products covered under the measure is yet to be officially notified.

According to Jahol Prajapati, research analyst at SAMCO Securities, Mexico’s Senate has cleared a protectionist tariff package imposing duties of 5–50 per cent on imports from countries without FTAs, including India, China, South Korea, Thailand and Indonesia.

“Most products are expected to cluster around the 35 per cent slab, while passenger vehicle duties will jump sharply from 20 per cent to 50 per cent,” Prajapati said. “India exported goods worth about $5.7 billion to Mexico in FY2024–25, with vehicles accounting for roughly one-third of that value.”

He noted that Indian automobile exports to Mexico—primarily from manufacturers such as Volkswagen/Skoda, Hyundai, Maruti Suzuki and Nissan—will face a direct hit. The development threatens both volumes and margins in a market that accounts for nearly 9 per cent of India’s total automobile exports. Beyond autos, higher tariffs on engineering goods, electronics and metals could suppress demand, though some niche Indian products with strong market positions may experience price-led pressure rather than outright volume losses.

Mexico’s Senate approved the tariff measure on December 11, 2025, after which it was cleared by both chambers of Congress. The move is aimed at boosting domestic manufacturing and correcting trade imbalances.

India had engaged with Mexico during the early stages of the proposal. The Indian Embassy in Mexico raised concerns with the Ministry of Economy on September 30, 2025, seeking exemptions or special concessions to protect Indian exporters from the impact of the higher duties.

Meanwhile, both countries are preparing to formally launch negotiations for a free trade agreement. Terms of Reference (ToR) for the talks are expected to be finalised soon, which experts believe could help insulate Indian exporters from the proposed tariffs.

Trade analysts also pointed out that Mexico’s decision comes amid pressure from the United States on its trade partners to align with Washington’s efforts to raise tariffs on China and curb transhipment into the US market.

In 2024–25, India’s exports to Mexico stood at $5.75 billion, while imports from Mexico were valued at $2.9 billion.