Why Mexico Is Slapping Up To 50% Tariffs On Asian Goods, And How Big Is The Impact On India?

Last Updated:December 12, 2025, 09:25 IST

From January 1, 2026, Mexico will impose up to 50% duties on over 1,400 goods from non-FTA nations. India’s vehicle, machinery and steel exports face some of the steepest hikes.

Mexico's President Claudia Sheinbaum. (Image: AFP/File)

Mexico has approved a new tariff regime that raises import duties on goods coming from countries with which it does not have a free trade agreement (FTA). The Senate cleared the measures for implementation from January 1, 2026. The revised structure covers more than 1,400 product categories and applies to countries such as India and China, both of which export significant volumes of manufactured and industrial goods to Mexico.

Countries with existing trade agreements, including the United States, Canada and the European Union, will not face these increases. Because India does not have a trade agreement with Mexico, its exports fall directly under the new duty slabs.

What Has Mexico Announced?

The approved tariff structure introduces duties between 5 per cent and 50 per cent on more than 1,460 imported items. The upper bands of 50 per cent apply to specific categories, with others falling into ranges of 30 to 35 per cent and lower slabs around 5 per cent. Mexico sources a wide range of goods from non-FTA partners, including automobiles, machinery, steel, chemical products, textiles, footwear, electrical and electronic equipment and plastic-based items. All such categories will now be subject to revised cost conditions.

What A Free Trade Agreement Means In This Context

A free trade agreement reduces or eliminates tariffs on goods traded between participating countries. Because the tariff increase applies exclusively to non-FTA partners, Indian exports will be subject to the higher duties once the new structure takes effect.

Why Is Mexico Raising Tariffs?

Mexico has linked the tariff move to multiple pressures. One major factor is the scale of low-priced imports from China, which holds a trade surplus of more than $100 billion with Mexico and has affected domestic sectors such as steel, auto parts and textiles. Chinese firms have also set up operations inside Mexico and supplied goods to the United States. The tariff change comes ahead of the 2026 review of the United States–Mexico–Canada Agreement, after both the outgoing Biden administration and the incoming Trump administration warned Mexico about Chinese goods entering the US through Mexican channels.

This shift also takes place in a broader trade environment in which the United States already imposes 25 per cent tariffs on Mexico. US President Donald Trump has repeatedly threatened further action, and concerns have grown about Asian products reaching the US via Mexico, including goods made by Chinese manufacturers operating there or routed through Mexican territory.

Mexico has also framed the tariff increase as a step to protect domestic industry and employment and as a way to correct distortions caused by cheap imports. Mexican President Claudia Sheinbaum and the ruling Morena party have presented the measure as a defence of Mexican workers facing competition from low-priced imports. The revised structure is expected to generate about 70 billion pesos, which corresponds to roughly $3.7 to $3.75 billion annually.

How Big Is India’s Export Exposure To Mexico

India exported goods worth $8.9 billion to Mexico in 2024. TradingEconomics data for 2025 lists India’s major export categories as $1.86 billion of vehicles, $612.38 million of electrical and electronic equipment, $560.87 million of machinery, $388.04 million of organic chemicals, $386.03 million of aluminium and $211.20 million of pharmaceutical products.

Which Indian Sectors Are Most Affected

The automobile sector is expected to face the steepest increase in costs. India exports between $800 million and $1 billion worth of passenger vehicles to Mexico annually. Mexico is India’s third-largest passenger vehicle export market after South Africa and Saudi Arabia. Under the new regime, passenger vehicles exported from India will face a 50 per cent tariff, up from about 20 per cent previously.

According to Reuters, $1.8 billion worth of Indian car shipments are at risk. It identifies Skoda Auto Volkswagen, Hyundai, Nissan and Maruti Suzuki among the major exporters, with Skoda Auto accounting for nearly half of India’s passenger vehicle shipments to Mexico.

Piyush Arora, managing director of Skoda Auto Volkswagen India, said: “Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models."

Auto components worth $600 to $700 million will now fall under duty bands between 25 and 50 per cent. Iron and steel exports of about $900 million will face tariff rates of 35 to 40 per cent. Textile, apparel and footwear shipments valued at $500 to $600 million will attract duties of 30 to 35 per cent. Other affected sectors include machinery, electrical equipment, aluminium, plastics, organic chemicals and pharmaceuticals, with pharmaceutical exports falling in duty ranges between 15 and 30 per cent.

How Much India’s Exports Could Decline

Across the affected categories, India’s exports to Mexico could fall by 25 to 40 per cent. The sharpest declines are expected in automobiles and intermediate goods because these categories both carry high export values and face some of the largest duty increases.

How Has India Responded So Far?

Indian exporters attempted to prevent the tariff move before it was approved, lobbying the Mexican Senate in November and December 2025. A Reuters-reviewed letter from an industry group shows that automobile exporters also urged the Indian government to act. These efforts did not alter the outcome. The matter has since been taken up diplomatically, with India exploring the possibility of a free trade agreement with Mexico or a partial scope arrangement covering sectors such as automobiles and steel to limit the impact once the new duties are in force.

Who Gains And Who Loses Under The New Tariffs?

Mexican industries in steel, textiles and specific auto-parts categories are expected to gain because competing imports from non-FTA countries will become more expensive. The Mexican government will also collect additional revenue from the new tariff structure. Exporters from India, China and other non-FTA Asian countries will face higher costs, and Mexican consumers may encounter higher prices for imported goods. Manufacturers in Mexico that rely on Asian inputs may also face increased production expenses.

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