1. Background and policy context

On 11 December 2025, Mexico approved a new tariff regime targeting imports from countries that do not have a free trade agreement with Mexico. This category includes India, China, South Korea, Thailand and Indonesia among others.

The stated objectives are to:

• Protect domestic manufacturing and employment
• Address concerns that Mexico is being used as a transit hub for extra-regional goods, especially from Asia, entering the North American market
• Signal to the United States ahead of the scheduled 2026 review of the USMCA that Mexico is willing to discipline non-partner imports

Although the policy is formally non-discriminatory across all non-FTA partners, its commercial impact is heavily concentrated on a few key Asian suppliers, including India.

2. Key features of Mexico’s new tariff measure

The measure significantly alters the cost structure for exporters into Mexico under the MFN route.

Tariff structure

• New ad valorem tariffs are in the range of about 5 percent to 50 percent
• The measure covers more than 1,400 tariff lines across industrial and consumer sectors
• For many products, earlier MFN tariffs in the range of 0 percent to 15 percent have been raised to 25 percent to 35 percent
• Passenger cars imported from non-FTA partners may now face duties up to 50 percent in certain categories

Coverage

The higher duties apply to a wide set of product groups, including:

• Automobiles and motorcycles
• Auto components
• Steel and aluminium products
• Industrial machinery and equipment
• Electrical and electronic goods
• Textiles, garments and footwear
• Plastics, chemicals, furniture and various other manufactured products

The measure is scheduled to be effective from 1 January 2026 for one year, with the option for review and continuation.

3. India–Mexico trade relationship and exposure

India and Mexico have built a significant trade relationship without a formal FTA, relying on MFN terms under the WTO.

Trade volume and balance

• India’s exports to Mexico in recent years have been in the broad range of 8 to 9 billion US dollars annually, against imports of about 2.5 to 3 billion US dollars
• Mexico is among India’s top ten trading partners globally and is a strategic gateway into the USMCA region

Composition of India’s exports to Mexico

India’s export basket to Mexico is concentrated in the very sectors now subject to higher tariffs, including:

• Passenger vehicles and other automobiles
• Two-wheelers and associated components
• Auto parts and systems
• Industrial machinery and capital goods
• Electrical and electronic equipment, including mobile phones and components
• Aluminium, iron and steel products
• Textiles, garments, made-ups and plastics
• Chemicals and pharmaceuticals

With the introduction of these tariffs, three-quarters of India’s exports to Mexico by value now fall under tariff lines where duties have been raised. This makes India one of the more exposed suppliers among the non-FTA group.

FTA-protected Asian competitors

Several Asian economies are insulated from this measure because they enjoy preferential access through trade agreements with Mexico. Examples include:

• Japan, Vietnam, Malaysia and Singapore through membership of the CPTPP
• The United States and Canada through USMCA
• The European Union, EFTA members, the United Kingdom and others through bilateral or regional FTAs

Producers in these countries can continue to export comparable goods to Mexico at preferential or zero tariffs, while similar products from India now attract significantly higher MFN duties. This shifts relative competitiveness in favour of FTA partners and squeezes market share for Indian exporters.

4. Impact channels for India

4.1 Automobiles and auto components

• Mexico is a major market for Indian passenger vehicles and two-wheelers
• India’s largest export segment to Mexico sees sharp increases.
• Passenger vehicles: from about 20 percent to roughly 35 percent
• Auto parts: from about 10 to 15 percent to around 35 percent
• Motorcycles: from about 20 percent to around 35 percent
• Auto component exports feeding into Mexico based manufacturing and assembly activities also face higher tariffs, which can disrupt participation in North American supply chains

Electronics and machinery

• Smartphones: from 0 percent to about 35 percent, which effectively shuts out most India based exports on price grounds
• Industrial machinery: from around 5 to 10 percent to about 25 to 35 percent, significantly raising landed cost for Mexican buyers and weakening India’s competitiveness in capital goods and engineering products

Metals

• Aluminium products: from roughly 5 to 10 percent to about 25 to 35 percent
• Steel flat products: from about 10 to 15 percent to as high as 50 percent in some categories, which effectively prices Indian suppliers out of the market in those lines

Labour intensive sectors

• Garments: from approximately 20 to 25 percent to around 35 percent
• Textiles: from about 10 to 15 percent to around 25 percent
• Ceramics: from about 10 to 15 percent to roughly 25 to 35 percent

These sectors typically operate on tight margins. Such tariff jumps can quickly translate into loss of orders for Indian firms to suppliers in countries that continue to enjoy preferential access.

4.5 Macro and strategic impact

• A sizeable portion of India’s exports to Mexico, estimated at around 4 to 4.5 billion US dollars annually, is now exposed to higher duties

Mexico has also served as a springboard into the wider North American market, so the impact is not limited to direct Mexico-bound flows but extends to supply chains that ultimately serve US and Canadian demand.

5. Conclusion

Mexico’s decision to increase import duties on non-FTA partners represents an important shift in its trade and industrial policy. It is part of a broader trend where countries are using tariffs, rules of origin and investment incentives to reshape supply chains in line with domestic priorities and geopolitical considerations.

For India, the measure is particularly significant because:

• Mexico is a key partner market and a strategic gateway to North America
• India’s export basket to Mexico is concentrated in precisely those industrial sectors that have seen the steepest tariff hikes
• Several competing suppliers in Asia enjoy preferential access that India does not currently have

The immediate effect is likely to be pressure on volumes and margins in autos, engineering, metals and certain labour-intensive products.