Explained: Winners and losers of Mexico's new tariff strike on India
Starting January 1, 2026, Mexico will impose tariffs ranging from 5% to 50% on over 1,460 products from any country that does not have a Free Trade Agreement (FTA) with it. Among the countries that will be hit by the new tariff regime is India–a non-FTA country.
WHAT IS FTA?
In this context, a Free Trade Agreement (FTA) is a bilateral or multilateral treaty between two or more countries that reduces or eliminates tariffs, duties, and other trade barriers on goods and services exchanged between the signatories. The core benefit here is tariff-free entry, sparing these nations while hitting non-FTA countries like India and China hard.
WHY IS MEXICO DOING THIS?
There are four main reasons behind Mexico’s move, each carrying a different political weight.
The first and most important reason is to contain the flood of cheap Chinese goods. China has a massive and growing trade surplus with Mexico exceeding 100 billion dollars. Mexican industries, particularly steel, auto parts, and textiles, have been severely affected by cheap Chinese imports and by Chinese companies that set up in Mexico just to re-export to the US.
The second reason is to align pre-emptively with the United States. The US-Mexico trade agreement is due for review in 2026, and both the incoming Trump administration and the outgoing Biden administration have warned Mexico that it could face tariffs if it continues serving as a backdoor for Chinese goods entering the US By imposing these tariffs on non-FTA countries, Mexico is sending a political signal to Washington: it stands with the US in curbing Chinese influence.
The third reason is domestic—protecting local industries and jobs. President Claudia Sheinbaum and the ruling Morena party presented the measure as a defence of Mexican workers against unfair competition.
The fourth reason is fiscal. The Mexican government estimates these tariffs will generate around 70 billion pesos, or roughly 3.75 billion US dollars, per year in additional revenue.
HOW BIG IS THE IMPACT ON INDIA?
The impact on India is very significant. After China, India is one of the hardest-hit countries under this new tariff regime.
Indian passenger vehicle exports to Mexico currently total between 800 million and 1 billion US dollars annually. Starting in January, these exports will face a 50% tariff—up from the previous 20%, making them largely unviable.
Mexico is India’s third-largest export market for passenger cars, after South Africa and Saudi Arabia. Major car manufacturers could see their Mexican sales collapse almost overnight unless they begin local assembly in Mexico or secure partial FTA exemptions.
Auto components and parts worth about 600 to 700 million dollars a year will be hit with tariffs between 25% and 50%, rendering many product lines uncompetitive.
Iron and steel exports, roughly 900 million dollars annually, will now face tariffs of 35% to 40%, dealing a serious blow to companies like Tata Steel.
Textile, apparel, and footwear exports of about 500 to 600 million dollars will now attract duties of 30% to 35%, which may allow only high-end niche products to survive while mass-market goods become too expensive.
Organic chemicals and pharmaceuticals, worth around 400 million dollars, will see a moderate impact under 15% to 30% tariffs, meaning generic drugs might still remain competitive.
Overall, India exported nearly 8.9 billion dollars’ worth of goods to Mexico in 2024, but these tariffs could cause a 25% to 40% decline in affected categories.
WHAT IS INDIA'S REACTION?
The Indian industry lobbied the Mexican Senate in November and December 2025, but their efforts did not succeed. The Indian government has since elevated the matter to an urgent diplomatic issue.
India is pushing to fast-track a bilateral Free Trade Agreement or at least a Partial Scope Agreement that includes automobiles and steel, hoping to mitigate the damage before the tariffs take effect
WHO WINS AND WHO LOSES?
In the short term, the winners are Mexico’s domestic steel, textile, and certain auto-parts industries, which gain an advantage over foreign competition. The Mexican federal budget also benefits from an additional 3.75 billion dollars in annual revenue, and the United States gains a more cooperative partner in its broader effort to contain China.
On the losing side are Indian exporters, especially in automobiles and steel, along with Chinese exporters, who are the primary targets of this policy. South Korean, Taiwanese, and Thai exporters will also suffer. Mexican consumers will pay higher prices for cars, clothing, and household goods, and Mexican retailers and manufacturers dependent on cheap Asian inputs will face higher costs.
In short, Mexico has initiated one of the most aggressive protectionist measures in decades. Though aimed primarily at China, the ripple effects have caught India squarely in the crossfire.
Source: India Today
