Mexico Tariff on India: Can 50% Duties Crush $6-Billion Trade?

In a move that threatens India's growing trade ambitions in Latin America, Mexico has approved punitive tariffs of up to 50 percent on Indian exports, which could severely affect New Delhi's $5.75 billion in annual shipments.

The Mexico tariff on India, set to take effect on January 1, 2026, comes at a particularly vulnerable moment for Indian exporters, who are already reeling from similar tariff walls erected by the United States. The Mexican Senate passed the bill, targeting approximately 1,400 tariff lines, including vehicles, auto components, textiles, plastics, and steel. Here’s a quick rundown…

Will Indian Automakers Bear the Brunt?

The automobile sector faces the most severe impact. The new duties could affect nearly $1 billion worth of shipments from Indian car exporters, including Maruti Suzuki, Volkswagen Group, Hyundai Motor India, and Nissan. Import duties on vehicles will surge from 20% to 50%, according to media reports by Business Standard and Reuters.

"This has come at the wrong time. The industry is still in shock," Ajay Sahai, director-general and chief executive officer of the Federation of Indian Export Organisations (FIEO), reportedly told Business Standard. "We are still struggling with the tariffs imposed by the US."

Engineering goods account for 61 percent of India's exports to Mexico, totaling $3.5 billion. As per Reuters, the Society of Indian Automobile Manufacturers urged India's commerce ministry in November to press Mexico to maintain the status quo on vehicle tariffs.

What Does India-Mexico Trade Look Like?

India's export portfolio to Mexico is heavily diversified and manufacturing-focused. Vehicles lead the basket, followed by machinery, electrical equipment, organic chemicals, and aluminium. Indian exports to Mexico totaled approximately $8.9 billion in 2024, reflecting a robust trade surplus.

Engineering products reportedly account for the lion's share of shipments, with automobiles and auto components making up nearly a third of total exports. Compact cars with engine sizes below one litre dominate vehicle exports, filling a specific market niche in Mexico's automotive sector.

Mexico's exports to India, valued at approximately $2.9 billion, include minerals, machinery, and specialized industrial equipment. Mexican firms such as Cinepolis, Softtek, and Metalsa have established operations in India, with cumulative investments totaling approximately $331 million, primarily in services and manufacturing.

Can India-Mexico Trade Weather This Storm?

The tariff shock risks undermining a robust bilateral trade relationship. Two-way goods trade is projected to maintain momentum at around $11.7 billion, with India maintaining a significant trade surplus. This marks the eighth consecutive year India has recorded a surplus with Mexico, cementing Mexico's position as India's second-largest trading partner in Latin America after Brazil.

Over 200 Indian companies spanning IT, pharmaceuticals, and automotive manufacturing operate in Mexico, with total Indian investments reaching approximately $4 billion as of March 2025.

The approved bill covers a wide range of critical export categories. According to Business Standard and Reuters, the final version reduces duties on nearly two-thirds of items compared to the original proposal, yet the bulk of affected products will still face hikes of up to 35 percent.

In its latest report, Global Trade Research Initiative (GTRI) underlines that Mexico's action is aligned with US trade priorities. The report notes, "Mexico's move is seen as aligning its trade policy more closely with recent U.S. protectionist measures... signalling support for near-shoring and tighter North American supply chains." However, the report adds that despite the sweeping impact, India is not expected to retaliate as imports from Mexico total just $2.9 billion, limiting leverage and the economic case for counter-tariffs. New Delhi will instead likely to focus on export diversification as global trade rules face accelerating erosion, says GTRI.

What Lies Ahead for Indian Exporters?

As the January 2026 implementation date approaches, Indian exporters face mounting pressure to either absorb costs, pass them to Mexican consumers, or seek alternative markets. The FIEO has called for urgent diplomatic engagement, emphasizing that only a comprehensive trade agreement could provide relief.

The Mexico tariff on India signals a broader shift toward protectionism in global commerce, with emerging economies caught between great power competition and domestic pressures.

For India, already navigating turbulent trade waters, Mexico's tariff strike compounds the challenge of maintaining export momentum in an increasingly fractious international marketplace.

(yMedia is the agency partner for this story)