Another ‘50%’ blow to India after Trump aggression: Mexico's tariff move, explained
Mexican lawmakers okayed tariffs on Asian imports, broadly aligning with US efforts to tighten trade barriers against China; India caught in crosshairs?
Prime Minister Narendra Modi's phone conversation with US President Donald Trump may have ignited fresh hope that the massive American trade tariffs may be eased at some point, but that came just as India looks to be facing a Mexican blow too. Or, is it even a blow, and is India even the target? Here's a lowdown.
Mexican lawmakers on Thursday gave approval for enhanced tariffs on Asian imports. This means tariffs of 5–50% on goods exported from countries such as India, hitting car trade for instance. But India was not be the sole target, and far from being the main target, of the Mexican move — that's China.
In fact, the tariff rate may not be totally new. Mexico had two years ago imposed this rate on some categories of products from countries with which it does not have a Free Trade Agreement (FTA), The Hindu has reported. That said, India exported $5.7 billion worth of goods to Mexico in 2024-25, which is barely 1.3% of its total exports that year, the report noted. That means, in relative terms, not a significant threat, though in absolute numbers this hurts some sector such as automobiles. The new decision that covers over 1,400 products takes effect starting 2026.
The effect in Mexico is two-pronged, in a broad sense: Its finance ministry estimates the new tariffs will raise nearly 52 billion pesos ($2.8 billion) in extra revenue; while manufacturers reliant on inputs made in China, India and South Korea, among others, have warned of rising costs that could fuel price rise.
Proxy for US pressure, aimed at China
The tariff align with US efforts to tighten trade barriers against China, reported news agency Bloomberg. President Sheinbaum claimed the measure does not specifically target China. “Our interest is not to generate conflict with any country in the world,” she said at Thursday press conference.
While Mexico has publicly denied any connection to Trump’s own tariff onslaught against the Asian giant, the new import levies resemble the US leader’s approach to China and others, including India.
US pressure on the country's southern neighbour is evident for years, and is now at a peak. The US-Mexico trade agreement is due for review in 2026, and both the previous Joe Biden administration and now the Trump administration have warned Mexico that it could face massive US tariffs if it served as a backdoor route for Chinese goods entering the US.
Canada, the northern neighbour of the US, has already emulated the US tariff approach towards China.
China's ministry of commerce has said it “hopes Mexico will correct its erroneous practices of unilateralism and protectionism as soon as possible".
Mexico's imports from China are far more than what it sells to the Asian giant — Beijing's trade surplus with Mexico last year was $71 billion. Now, Chinese cars will face among the steepest tariffs, at 50%. China’s auto sector currently holds 20% of the Mexican market, rising steeply in less than a decade.
But India is essentially caught in the crosshairs here.
Mexican tariff impact on India
Since the tariffs target any country lacking a Free Trade Agreement (FTA) with Mexico, the ripple effects have hit India's major export sectors, including automobiles, steel, and textiles.
Analysts suggest that these new tariffs could lead to a 25–40% decline in some affected export categories, India Today report. In terms of impact, the automotive sector is hit the hardest. Mexico is currently India’s third-largest export market for passenger cars, following South Africa and Saudi Arabia.
Indian passenger vehicle exports to Mexico, totaling between $800 million and $1 billion annually, face a 50% tariff, representing a steep jump from the previous 20% duty, news agency Reuters reported.
The Society of Indian Automobile Manufacturers (SIAM) had lobbied the Indian commerce ministry earlier this year to press Mexico to "maintain status quo" on tariffs, Reuters reported. The industry argued that Indian-origin vehicles, which are mostly compact cars with engine sizes of less than one litre, constitute less than 7% of the total Mexican passenger vehicle sales, and do not cater to the high-end segments manufactured locally, thus posing no threat to local industry. Details of government moves, if any, were not known, Reuters noted.
Further, India's iron and steel sectors are subject to Mexican tariffs ranging from 35% to 40%. Auto components face 25–50%, while textile, apparel, and footwear are hit by duties of 30–35%.
India is currently pushing to fast-track a bilateral Free Trade Agreement or at least a partial pact that specifically covers automobiles and steel.
What's the latest on US tariffs on India?
As for managing Trump's tariffs, Indian PM Narendra Modi spoke with the US President by phone on Thursday. "We reviewed the progress in our bilateral relations and discussed regional and international developments," Modi said in a post on X, and described the call as “warm and engaging”.
Modi and Trump have spoken at least three times since the latter hiked tariffs on imports from India to as much as 50%, half of which he termed “penalty” for India's oil trade with Russia despite Vladimir Putin's war on Ukraine. India has stressed its decades-old ties with Russia, underlined by Putin's recent state visit.
Trade negotiations between the US and India hit major turbulence in July-August as India drew red lines against opening its market for US farm products. Another factor was India's refusal to credit Trump with mediating for peace after an India-Pakistan military conflict in May. Trump was apparently banking on that credit to further make a case for a Nobel Peace Prize for himself.
Anyhow, talks resumed and are continuing amid signs that Indian oil refiners are reportedly cutting Russian crude purchases after the US imposed sanctions on major Russian companies.
(with inputs from PTI, Bloomberg and Reuters)
