In response to the report, almost 75% of India’s $5.75 billion of exports to Mexico in FY25 might be affected by the tariff hikes, basically altering the economics of accessing India’s largest export vacation spot in Latin America after Brazil.
The tariff overhaul, cleared by each homes of the Mexican Congress on 11 December, raises duties on a variety of merchandise to as excessive as 50%, sharply eroding India’s competitiveness within the Mexican market.
What’s behind the hike?
The tariff hikes are extensively seen as Mexico aligning its commerce coverage with that of the US, which has taken a protectionist flip beneath President Donald Trump forward of the 2026 assessment of the US-Mexico-Canada Settlement (USMCA). By elevating commerce limitations for non-FTA companions, Mexico is signalling help for North American nearshoring (relocating an organization’s enterprise operations or manufacturing actions to a close-by nation) and tightening of provide chains across the USMCA area, the GTRI report famous.
GTRI co-founder Ajay Srivastava stated Mexico’s transfer additionally displays the rising fragility of worldwide commerce guidelines. “Mexico is now the second main financial system after the US to brazenly breach WTO tariff commitments. By charging completely different tariffs to completely different WTO members, Mexico undermines the most-favoured-nation precept, however these actions are going largely unchecked,” he stated.
The proposal to start out FTA negotiations with Mexico remains to be on the dialogue stage. On 10 September, commerce and trade minister Piyush Goyal met Francisco Cervantes, president of Mexico’s Enterprise Coordination Council (CCE), in New Delhi and stated that India would work in direction of strengthening commerce and funding ties with Mexico.
Impression on India: uneven however extreme
Below the brand new tariff construction, Mexico will impose duties of 5-50% on imports from India, China, South Korea, Thailand and Indonesia. For many merchandise—together with equipment, electronics, plastics and textiles—duties will rise from 0-15% to round 35%. A couple of strategic gadgets, primarily metal, will face a punitive 50% tariff, in keeping with the GTRI report.
The influence of those hikes on India might be extreme however uneven throughout sectors. Prescribed drugs, for example, will stay largely insulated. Duties will improve solely marginally—from 0-5% to 0-10%—permitting India’s generic medicine to stay aggressive in Mexico. India exported $197 million price of prescribed drugs to Mexico in FY25.
Steel exports, then again, will face the steepest limitations. Aluminium exports of $383 million will see duties rise from 5-10% to 25-35%, whereas iron and metal exports of $128 million face the harshest improve – from 10-15% to 35% on lengthy merchandise and from 10–15% 50% on flat merchandise, making Indian metal commercially unviable in Mexico.
Passenger automobiles, India’s single-largest export to Mexico ($938 million in FY25), will see tariffs rise from 20% to 35%, weakening India’s place in a market influenced closely by USMCA sourcing guidelines.
Duties on auto part exports price $507 million might be hiked from 10-15% to 35%, disrupting India’s participation in provide chains based mostly in Mexico that cater to the US market. Motorbike exports price $390 million, dominated by Bajaj Auto, TVS Motor and Hero MotoCorp, will even see tariffs improve from 20% to 35%.
Electronics and equipment might be hit exhausting as nicely. Smartphones, which presently enter Mexico duty-free, will entice a 35% tariff, successfully shutting down India’s handset exports to that nation. Industrial equipment price $548 million will see duties rise from 5-10% to 25-35%, elevating landed prices and lowering worth competitiveness, it stated.
Labour-intensive sectors akin to clothes, textiles and ceramics will even come beneath strain, with tariffs climbing from 20-25% to 25-35%, threatening these exports which might be largely pushed by small and medium companies.
Will India hit again?
Srivastava stated that India is unlikely to retaliate, as imports from Mexico stand at simply $2.9 billion—about half the worth of India’s exports—leaving it with little financial leverage. As an alternative, India is predicted to deal with diversifying markets and treating Mexico’s tariff hike as one other signal of the weakening multilateral buying and selling system fairly than a dispute suited to a bilateral confrontation.
“Mexico’s tariff hike is a severe setback for Indian exporters, particularly in autos, engineering items and MSME-led sectors,” stated Arun Kumar Garodia, former chairman of the Engineering Export Promotion Council (EEPC). “A sudden soar to 35-50% duties will worth many Indian merchandise out of the Mexican market and disrupt provide chains constructed over years. At a time when international commerce guidelines are weakening, Indian exporters must diversify shortly and construct resilience in opposition to such unilateral tariff shocks,” Garodia added.
The EEPC has beforehand flagged the problem to the commerce ministry, noting the pressing want to ascertain a commerce settlement with Mexico after the Mexican president introduced two main trade-related initiatives, together with a major reform to the Common Import and Export Tariffs Regulation (LIGIE), in September.
“This reform goals to restructure tariff frameworks by considerably growing import duties on a variety of merchandise throughout a number of sectors. This may straight influence international locations that do not need FTAs with Mexico,” EEPC chairman Pankaj Chadha wrote in a letter dated 2 December to Union commerce minister Piyush Goyal, the council stated.
Given Mexico’s significance as a key export vacation spot for Indian engineering merchandise, the trade physique had warned the federal government that the brand new measures may erode India’s competitiveness within the Mexican market. To deal with this, it stated India ought to pursue an FTA or no less than a preferential commerce settlement (PTA) with Mexico overlaying the affected sectors, Chadha stated in his letter.
India’s engineering exports to Mexico have already begun to weaken. Throughout April-October 2025, complete engineering exports to Mexico declined by 12%. The autumn was broad-based, with metal exports down 7%, iron and metal merchandise down 26%, aluminium and its merchandise down 56%, auto elements down 20%, and exports of two- and three-wheelers down 32%.
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