Mexico slapping 50 per cent tariffs on non-FTA countries including India has led to concerns among the automobile and auto component industry with industry leaders raising the demand to expedite talks on signing a free trade agreement (FTA) with the country.
While a report of the Global Trade Research Initiative (GTRI) has flagged the potential impact that the tariffs can have on different industrial sectors of India, it has emerged that industry leaders had sensed the possibility of the North American nation slapping tariffs on India even before the announcement.
The automobile industry leaders and Indian exporters had held “informal discussions” with Indian commerce minister Piyush Goyal even before Mexico announced the tariffs and the government is now engaging with Mexico to find mutually beneficial solutions, highly-placed sources confirmed to TDG.
A vivid report by the GTRI on the impact of tariffs on Indian exports states that nearly 75 per cent of India’s USD 5.75 billion exports to Mexico will be affected with tariffs estimated to jump from 0–15 per cent to around 35 per cent.
The report in possession with TDG states that “autos and auto components—India’s biggest export segment are set to face duty hikes to 35 per cent, disrupting Mexico-based supply chains linked to US market.”
“Mexico will impose steep import tariffs—ranging from about 5 per cent to as high as 50 per cent—on a wide range of goods from countries that do not have free-trade agreements with Mexico, including India, China, South Korea, Thailand and Indonesia. The hikes target key sectors such as automobiles, auto parts, textiles, steel, plastics and clothing, with most products moving from earlier tariff levels of 0–15 per cent to about 35 per cent, and a few strategic items—especially steel—jumping to the maximum 50 per cent duty,” the report states.
It further says that for India, “the measures affect nearly three-quarters of its USD 5.75 billion exports to Mexico in financial year 2025, fundamentally altering the commercial logic of accessing the Mexican market.”
Autos and components to take hardest hit, says GTRI, concerns among automobile/auto component exporters
The GTRI report states that automobiles and auto components, India’s largest export segment to Mexico, will be among the worst affected.
“Passenger vehicles, with exports of USD 938.35 million in financial year 2025, face a tariff increase from 20 per cent to 35 per cent, sharply eroding price competitiveness in a market increasingly shaped by USMCA (US-Mexico-Canada Agreement) sourcing rules. The impact is even more severe for auto components, which accounted for USD 507.26 million in exports. Tariffs rise steeply from 10–15 per cent to 35 per cent, disrupting India’s deep integration into Mexico-based automotive supply chains that serve the US market,” the report states.
It further predicts that motorcycles- another Indian stronghold with exports of USD 390.25 million- “will see duties increase from 20 per cent to 35 per cent, threatening volumes, margins and brand presence for manufacturers such as Bajaj Auto, TVS Motor and Hero MotoCorp.”
Speaking to TDG, Ajay Sahai, Director General and CEO of the Federation of Indian Export Organisations (FIEO) said that auto will be the worst affected sector due to the tariffs slapped by Mexico as it forms almost one-third of the exports from India to Mexico followed by machinery including electrical and electronic products, followed by organic chemicals and pharmaceuticals.
“70 per cent of engineering products will definitely be impacted by tariffs imposed by Mexico which range between 35-50 per cent on products from these sectors even as exporters are already struggling with high tariffs from the US,” he said.
It has emerged that even before the tariffs were announced, the Society of Indian Automobile Manufacturers (SIAM) had urged the commerce ministry to intervene, warning that “the proposed tariff hike is expected to have a direct impact on Indian automobile exports to Mexico.”
A Reuters report stated that SIAM wrote a letter to Goyal in November – before the tariffs were announced- “seeking Government of India’s support to kindly engage with the Mexican government.”
The letter argued that Indian-made vehicles pose no threat to Mexico’s domestic industry, saying that “Indian-origin vehicles are not a threat to Mexican local industry as Indian vehicles do not cater to high-end segments manufactured by Mexico for serving the North American market.”
Asked about the letter, an automobile industry leader told TDG that talks were held with the commerce minister informally as well and the concerns of the industry were conveyed to him and the industry has urged the government to engage with Mexico on the issue.
Suggesting remedial measures, Sahai said that India should either engage with Mexico bilaterally (to bring down or scrap the tariffs) or expedite the talks over the impending free trade agreement with the country.
“With Mexico, India already has an open line for communication. It’s a new trend that has been started to slap tariffs on countries with which there is no FTA in place and countries are administratively raising tariffs without any basis. Our share of shipments to Mexico account for just 6.7 per cent of the country’s annual passenger vehicle sales so we are not targeting the domestic players,” he said.
Of India’s total car shipments to Mexico, Skoda Auto accounts for nearly 50 per cent.
In a statement to TDG, the company said that India has been a strong export base for Škoda Auto Volkswagen India for many years, and that continues to guide how the company builds and engineers cars for global markets.
“Today, our Made-in-India vehicles reach over 40 countries, which is a testimony to the depth of our operations and the trust our locally manufactured cars have earned. Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models. We are monitoring the situation continuously,” it said.
Electronics/machinery sector to face sharp setback:GTRI
The GTRI report further states that the electronics and machinery sector is set to face an equally sharp setback.
“Smartphones, which recorded USD 284.53 million in exports to Mexico in financial year 2025, earlier entered the country duty-free (0 per cent). From January 2026, they will face a 35 per cent tariff, effectively shutting the Mexican market for Indian handset exports. Industrial machinery, India’s second-largest export category to Mexico at USD 547.99 million, will see duties rise from 5–10 per cent to 25–35 per cent, significantly raising landed costs and curbing demand for Indian capital goods in price-sensitive segments,” it said.
The report further states that the tariff shock is particularly punitive in metal sector.
“Aluminium exports worth USD 383.28 million face duties increasing from 5–10 per cent to 25–35 per cent, weakening India’s competitiveness against regional and USMCA-based suppliers. Iron and steel exports of USD 128.44 million are hit hardest: tariffs rise from 10–15 per cent to 35 per cent on long products and a prohibitive 50 per cent on flat products, effectively closing the Mexican market to Indian steel exporters. Articles of iron or steel, valued at USD 176.87 million, see duties jump from 15 per cent to 35 per cent, discouraging further export growth,” it states.
The report also states that labour-intensive sectors such as garments, textiles and ceramics will also be heavily impacted by the Mexican tariffs.
“Garments and made-ups, with exports of USD 245.90 million, face tariffs rising from 20–25 per cent to 35 per cent, sharply reducing India’s competitiveness against suppliers from FTA countries. Textiles exports of USD 149.94 million see duties increase from 10–15 per cent to 25 per cent, while ceramic products, valued at USD 94.12 million, move from 10–15 per cent to 25–35 per cent, squeezing margins in construction and consumer markets,” it said.
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Sofia Babu Chacko is a journalist with over five years of experience covering Indian politics, crime, human rights, gender issues, and stories about marginalized communities. She believes that every voice matters, and journalism has a vital role to play in amplifying those voices. Sofia is committed to creating impact and shedding light on stories that truly matter. Beyond her work in the newsroom, she is also a music enthusiast who enjoys singing.
