India-Mexico Trade at Tipping Point: Defying the 50% Wall

Synopsis: India’s exports to Mexico face a pivotal crossroads with up to a 50% tariff wall (many at 35%) looming from early 2026. Sparked by Mexico’s Senate to shield local factories from import floods by non-FTA countries like India, these levies, ranging from 5% to 50% (with many at 35%), will replace prior rates of 0-20% on over 1,400 items, upending a vital trade lifeline when they take effect on January 1, 2026. 

Tariff Origins and India’s Overall Exposure

Mexico’s newly approved tariffs are designed to protect domestic industries from a surge of low-cost imports, with countries lacking free trade agreements facing the greatest impact. India stands out among the most affected. Endorsed by the Mexican Senate, the measures focus on vulnerable sectors in an effort to safeguard local jobs and manufacturing capacity, gradually undermining India’s cost advantage in a bilateral trade relationship valued at about $5.7 billion annually.

India’s exposure is considerable. Nearly 75% of its exports to Mexico, worth more than $5 billion, are now vulnerable to higher duties. Automobiles and auto components are particularly at risk, accounting for almost one-third of India’s shipments to the Mexican market. 

Overall merchandise trade between the two countries stood at $8.74 billion in 2024. Indian exports accounted for $5.73 billion of this total, while imports from Mexico were valued at $3.01 billion, resulting in a trade surplus of $2.72 billion for India, according to DGCI&S data. Measured by export value, Mexico ranks as India’s 21st largest export market in FY25.

Although India retains relative strengths in segments such as aluminium, ceramics, and tractors, which may offer limited insulation, the broader tariff regime threatens to disrupt established supply chains and weaken India’s standing in one of its faster-growing export destinations. The changes place additional pressure on India’s trade surplus with Mexico and highlight the need for a strategic response, including renewed urgency in pursuing free trade agreement negotiations.

Tariffs Target India’s Auto Exports

Mexico is among India’s top markets for auto and auto parts shipments, the third-largest for auto parts with ~$800 million in FY25 exports, the biggest for two-wheelers at $390 million, and second for three-wheelers at $51 million. These ties highlight growing trade links in the mobility sector, but new tariff hikes could threaten to disrupt them. Passenger vehicle duties are likely to jump from 20% to 50%, two-wheeler tariffs from 15% to 35%, and auto parts from 0-35% to 10-50%, alongside 35% levies on most other goods like textiles, apparel, plastics, steel, metals, footwear, and aluminium.

Automobiles, auto components, and aluminium face the biggest risks from these changes. Indian carmakers, including Volkswagen/Skoda, Hyundai, Maruti Suzuki, and Nissan, will feel immediate strain on volumes and margins in a market that takes nearly 9% of India’s global auto exports. The duties could break supply chains and weaken India’s edge.

The Society of Indian Automobile Manufacturers (SIAM) has called on the government to negotiate a rollback, warning of long-term harm to this key trade route. Still, domestic boosts like GST cuts, lower repo rates, tax reforms, and festival-wedding demand may ease the impact on India’s auto sales in the near term, even as external trade risks persist.

Niche Strengths in Aluminium, Ceramics, and Tractors

Mexico could face a significant challenge in replacing even a portion of India’s exports, particularly in specialised sectors where Indian suppliers hold a dominant position. Data from Moneycontrol shows that of the $5.6 billion in goods India shipped to Mexico last year, about $589 million, which is roughly 10%, comes from categories in which India already accounts for more than half of Mexico’s total imports, making rapid substitution extremely difficult despite the new tariffs.

Aluminium illustrates this dominance: in 2024, India exported $189 million worth, capturing 53% of Mexico’s market and establishing itself as the primary source for this vital metal. Ceramic tiles follow a similar pattern, with nearly $100 million in exports and a share exceeding half of Mexico’s demand, reinforcing India’s role as a dependable supplier.

India dominates even more in tractors, capturing 64% of key market segments and leaving Mexican buyers with limited short-term options. These firm positions in aluminium, ceramics, and tractors underscore India’s critical role amid mounting trade tensions.

Stocks that could be impacted

Mexico’s tariffs target export-reliant auto, component, and aluminium firms, triggering recent stock pressure as investors brace for volume hits and squeezed margins.

CompanySector ExposureKey ConcernMahindra & Mahindra (M&M)Autos/Auto ComponentsMexico is a key export market given the company’s North America presence, and potential tariff hikes could cause short-term disruptions.Eicher MotorsAutos (CVs/Motorcycles)Royal Enfield’s motorcycle exports may be vulnerable to proposed tariff hikes due to Eicher Motors’ exposure to overseas markets. In FY25, Eicher Motors’ North American subsidiary generated revenues of USD 31.92 million.Hindalco IndustriesAluminumMexico is the fourth-largest destination for India’s aluminium exports, with shipments worth USD 0.4 billion, posing a margin risk from potential tariff hikes, especially for Hindalco, given its North American exposure through Novelis and the AluChem acquisition.Bharat ForgeAuto ComponentsBharat Forge has a strong North American presence through its subsidiaries, but this exposure poses a risk. In FY25, the region delivered only moderate growth amid flat production volumes, and proposed increases in auto component duties (from 0-35% to 10-50%) could further pressure the business.Samvardhana MothersonAuto ComponentsExposure to Mexico and the wider North American market, though its strong regional footprint and localisation could help mitigate potential tariff-related disruptions.Hero MotoCorpTwo-WheelersLatin America is a key export market, with dispatches to the region rising 51.8% in FY25. Any proposed tariff increases, if implemented, could cause short-term disruption to shipments.Bajaj AutoTwo-Three WheelersExports recorded strong growth in FY25, driven by sustained momentum in Latin America, where motorcycle dispatches rose 30%. Any tariff increases in key markets such as Mexico, if implemented, could pose near-term risks to this exposure.

Mitigation Strategies: Diversification, Exemptions, and Supply Chain Adjustments

Indian exporters are actively pursuing multiple strategies to cushion the impact of Mexico’s tariffs. Commerce Secretary Rajesh Agrawal stated on December 15, 2025, that India and Mexico are discussing potential measures, including a fast-tracked Preferential Trade Agreement (PTA) to reduce or exempt duties on select products, potentially protecting around $2 billion in exports.

Diversification is emerging as a key tactic, with companies redirecting shipments to alternative markets while seeking exemptions for critical goods. Adjustments to supply chains, such as local assembly in Mexico or routing through third countries, offer additional relief, although these measures may initially increase costs. The tariff proposal, initially introduced in September 2025, deferred to August 2026, resubmitted on December 3, and now approved by Mexico’s Parliament, is pending presidential gazette notification, leaving a narrow window for negotiated carve-outs before its January 1, 2026, implementation.

Long-Term Outlook for India-Mexico Trade Amid Global Shifts

India’s key exports to Mexico, which have historically driven a robust trade surplus, now face a critical juncture with the proposed 50% tariff slated for early 2026. This Senate-approved barrier, targeting non-FTA imports, hits autos and components, the backbone of bilateral trade, potentially jeopardizing supply chains for passenger vehicles, two-wheelers, and parts supplied by firms such as Mahindra & Mahindra, Eicher Motors, Hero MotoCorp, Bajaj Auto,  Bharat Forge, and more. Recent stock dips reflect investor concerns over potential volume and margin pressures, despite short-term domestic boosts from festival demand.

However, India retains strongholds in aluminium, ceramics, and tractors, where it dominates Mexican imports, creating critical dependencies that provide breathing room. Proactive steps shine through: Commerce Secretary Rajesh Agrawal’s push for a fast-tracked PTA to safeguard key shipments, alongside diversification into new markets, product exemptions, and strategic supply chain shifts, such as local assembly. With SIAM urging rollbacks and the tariff’s path from proposal to approval leaving a narrow negotiation window, India’s diplomatic agility and sectoral edges position it to weather global tensions. This pivotal moment could forge stronger, more resilient India-Mexico trade bonds. 

The proposed tariff hikes come amid a long-overdue India-US trade deal, adding to macroeconomic uncertainty. While India’s auto and auto components sector could face short-term disruptions from tariffs of up to 50%, its dominance in sectors such as aluminium, ceramics, and tractors makes immediate replacement difficult. Investor caution is already evident: the Nifty Auto Index has been falling since December 15, losing around 2.5%, reflecting concerns over potential volume and margin pressures. Overall, the situation underscores both the risks and resilience of India-Mexico trade. 

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