Mexico’s 50% tariff hike spurs Indian exporters to seek FTA amid rising pressure on steel, auto sectors

Tariff increases of as much as 50 per cent will affect textiles, shoes, appliances, cars and auto parts among other things beginning in January.

Some Indian exporters have cautioned that Mexico’s move to raise import tariffs, in some cases up to 50 percent, could have a serious impact on key exports, with an even sharper blow expected for automobiles, auto components and steel.

This is because Mexico had already imposed tariffs ranging from 5 percent to 50 percent on several of these very products in April 2024, leaving these industries particularly vulnerable to potentially another round of increases.

Certain exporters have formally urged the Commerce Ministry to pursue a Free Trade Agreement (FTA) with Mexico to cushion the blow, with a source adding that industry leaders have even flagged the issue directly to Minister Piyush Goyal.

“We hope talks begin soon, but we were told Mexico doesn’t want to engage with us yet,” the source said.

The Mexican Senate on December 11 approved a plan to raise import tariffs to up to 50 percent next year on more than 1,400 goods coming from India, China and other Asian economies in a bid to shield domestic manufacturers.

Higher tariffs will apply to imports from countries that do not have trade agreements with Mexico, such as China, India, South Korea, Thailand and Indonesia.

EEPC India Chairman Pankaj Chadha told Moneycontrol that India should initiate FTA talks with Mexico to mitigate the impact of rising tariffs and that he hopes negotiations will begin soon.

In fact, EEPC India, the association representing engineering exporters, had flagged the issue in a letter to the commerce minister in November, cautioning that steeper tariffs from Mexico could erode the competitiveness of key export segments and urged the government to begin negotiations for a Free Trade Agreement or at least a Preferential Trade Agreement.

During April to October 2025, India's total engineering exports to Mexico experienced a decline of 12 percent on a year-on-year basis.

In this period, outbound shipments declined across various sectors, including a 7 percent reduction in steel, a 26 percent drop in iron and steel products, a 56 percent decline in aluminium and its products, a 20 percent fall in auto components, and a 32 percent decrease in two and three-wheelers.

India’s total exports to Mexico in FY25 stood at $5.75 billion, led by engineering goods worth $3.53 billion, electronic goods $544.57 million, organic and inorganic chemicals $400.53 million, drugs and pharmaceuticals $320.19 million, ready-made garments $190.26 million, and plastics and linoleum $158.76 million, along with other major shipments such as spices, leather products, and gems and jewellery.