India faces fresh export pressures as Mexico raises tariffs

Mexico’s decision to sharply raise tariffs on imports from countries that it does not have any trade agreements with, is set to challenge India’s export momentum at a time when the country is trying to strengthen its global manufacturing position. The measures, which take effect on January 1, 2026, increase duties on hundreds of goods—including automobiles, auto parts, textiles, plastics and steel—to as high as 50 per cent. Most categories will see tariffs rise to about 35 percent.

India, which exported goods worth around $5.3 billion to Mexico last fiscal year, will face a direct shock across multiple sectors, noted Reuters. Passenger vehicles account for close to $1 billion of that total, but the exposure extends well beyond one industry. The tariff regime affects several product lines where Indian manufacturers have built strong positions in price-sensitive international markets. For many firms, Mexico functions as a gateway into Latin America’s growing consumer and industrial demand, making the duty hike a structural setback.

Federation of Indian Export Organisations (FIEO) stated in an official comment, “Mexico’s decision to impose tariffs of up to 50% on imports from India is a matter of concern, particularly for sectors like automobiles and auto components, machinery, electrical and electronics, organic chemicals, pharmaceuticals, textiles and plastics, where Indian exporters have been steadily building a strong presence. Such steep duties will erode our competitiveness and risk disrupting supply chains that have taken years to develop. This development also underlines the little urgency for India and Mexico to fast-track a comprehensive trade agreement.”

Tej Contractor, Director at MCC Container Lines, stated, " Mexico is a large trade partner, so the impact of these tariffs will not be isolated to India. While there may be no direct effect immediately, we will soon see significant implications—especially in pharmaceutical and automotive pricing, as well as in the broader global exchange of goods. The trade ofachinery and auto components will be largely affected.

In a LinkedIn post, Saharsh Daman, CEO of Federation of Automobile Dealers Associations(FADA) stated, "Industry and Government’s task is cut out as they need to swiftly activate their diplomacy to set things right." He mentioned that it is a serious challenge with only 20 days to respond. "While India enjoys strong leverage in aluminium (53% Mexican market share), ceramics and certain tractor segments (total ₹4,900 crore of “hard-to-replace” goods), the automobile segment has no immediate alternative supplier base in Mexico," he noted.

Talking about the impact on the pharmaceutical industry, Vijay Shetty, Senoir Vice President - Global Distribution and Supply Chain at Alkem Laboratories stated that he does not think these tariffs will effect pharmaceuticals exports out of India to Latin America countries. He noted, "India is one of the biggest exporters of medicines to Mexico. Latin American companies do not have the in-house manufacturing capabilities to manufacture complex pharma products. Putting a tariff on India pharma will end up being costly for Mexico itself since India is self-sufficient in producing medicines and they are not.

Export-heavy manufacturers—from engineering goods to textiles and plastics—use Latin American markets to diversify beyond traditional trade lanes in the US, Europe and Africa. Many of these companies price their products for competitiveness in developing economies. A sudden increase in duties erodes that advantage, forcing businesses to reconsider supply chains, product mixes and investment commitments.

Contractor noted, "India has made a statement on the global stage. Everyone wants to trade with India, and tariffs are a lesson. There are better ways to approach the situation so illegal goods do not enter the market. Trade will not stop; trade and commerce will increase."

At a macro level, the development signals the limits of India’s current trade architecture. Without bilateral or regional trade agreements with Mexico, Indian exporters remain vulnerable to policy shifts they cannot influence. The episode also underlines the need for India to re-evaluate its strategy on securing market access, particularly in regions where demand is expanding but trade partnerships remain thin.