Accelerated trade talks between Mexico and India could be on the horizon after steep new tariffs that could hit India especially hard were approved by both houses of the Mexican Congress.

The new tariffs, meant to strengthen Mexican manufacturing and reduce trade imbalances, are aimed at countries without free trade agreements with Mexico. Besides India, those countries include China, South Korea, Thailand and Indonesia. 

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Despite attracting criticism from business groups, Mexico’s government expects the tariffs to bolster local industry and protect employment.

The new tariffs could be as high as 50% and were said to be introduced to appease the United States ahead of the review of a regional trade agreement, the USMCA, in 2026. 

“Such steep duties will erode our competitiveness and risk disrupting supply chains that have taken years to develop,” the Federation of Indian Export Organisations’ Director General Ajay Sahai stated.

The higher duties will take effect on Jan. 1, 2026.

In response, India is pushing for a free trade agreement to avoid around US $2 billion worth of Indian exports being subject to the new tariffs, Rajesh Agrawal, India’s trade secretary, said on Monday.

“Mexico’s primary target is not to hit Indian exports,” Agrawal said. “India has engaged with Mexico to pursue a trade agreement to mitigate the impact promptly.” 

According to Agrawal, Mexico and India have had preliminary technical discussions on such a deal following an online meeting between Agrawal and Mexico’s Deputy Minister Luis Rosendo this month. 

In 2024, India exported $5.73 billion of goods to Mexico, while Mexico exported $3.01 billion of products to India. Key exports included vehicles, base metals, auto parts and textiles. 

The impact of auto sector tariffs

Mexico’s new tariffs are expected to be especially detrimental to India’s auto sector, which exports around $1 billion worth of shipments to Mexico each year, with the import duty on cars expected to climb from 20% to 50%. 

In November, the Society of Indian Automobile Manufacturers industry group called for India’s Commerce Ministry to encourage Mexico to “maintain status quo” on tariffs for vehicles shipped from India to its third-largest car export market, according to a letter from an industry group reviewed by Reuters.

“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,” the industry group said in its letter.

With reports from Reuters and The Economic Times