Mexico’s decision to sharply raise import tariffs is set to create uneven but significant challenges for Indian exporters, with the automobile sector facing the most immediate impact. The tariff increase — which lifts duties on imported vehicles to as high as 50% from 20% — could affect nearly $1 billion worth of Indian car exports, according to a Reuters report citing industry sources and correspondence reviewed by the agency.
Major automakers exporting from India, including Volkswagen, Hyundai, Nissan and Maruti Suzuki, are expected to bear the brunt of the move. Mexico is India’s third-largest destination for car exports after South Africa and Saudi Arabia, making the policy shift particularly disruptive for manufacturers that rely on overseas markets to maintain production volumes and achieve economies of scale.
Industry bodies had attempted to avert the decision. The Society of Indian Automobile Manufacturers (SIAM), which represents companies such as Volkswagen, Hyundai and Suzuki, wrote to India’s commerce ministry in November urging it to engage Mexican authorities and preserve existing tariff levels. The proposed hike, the group warned, would directly hurt Indian automobile shipments and undermine long-established export relationships. Despite these efforts, the higher tariffs were finalised.
For Indian carmakers, the impact extends beyond lost competitiveness in one market. Exports often help manufacturers offset slower domestic demand, improve margins and keep factories running at optimal capacity. With Mexico becoming a more expensive destination, companies may now need to revisit export-led strategies that were central to their business models.
Beyond automobiles, several other Indian export categories are exposed to the tariff increases. Steel, aluminium, plastics and textiles — all key manufacturing outputs — are included in Mexico’s revised duty structure. Higher import costs could prompt Mexican buyers to either absorb the price increase, renegotiate contracts, or shift sourcing to alternative suppliers, potentially eroding India’s market share in these segments.
The tariff action also risks triggering a broader recalibration of global supply chains. Indian exporters may look to redirect shipments meant for Mexico to other regions, while policymakers could explore trade negotiations or diplomatic engagement to soften the impact. At the same time, Mexican importers may diversify away from heavily taxed sources, increasing competitive pressure on Indian firms.
There may, however, be limited upside in sectors not directly affected by goods tariffs. Services such as IT and software, along with pharmaceuticals, remain outside the scope of the current measures. These areas, where Indian companies enjoy strong global competitiveness, could see relatively greater traction if Mexico seeks to rebalance trade flows.
In the near term, the tariff hike is likely to hit India’s automobile exports and certain intermediate goods the hardest. Over the longer run, the consequences will depend on India’s policy response, the scope for bilateral dialogue with Mexico, and the broader direction of global trade — as economies increasingly grapple with the tension between protectionist impulses and supply-chain integration.