Mexico slaps up to 50% tariffs on Indian exports: Significant impact expected on auto and auto-parts sectors due to high tariff hikes
Mexico Levies Up To 50% Tariffs on Indian Exports
A Detailed Analysis of What Escalated, How, and Its Impact on India
Mexico has recently imposed heavy increases in tariffs ranging from 20% to 50% on various foreign goods, and Indian exports are some of the hardest hit. It is noteworthy that the India-Mexico trade relationship has been growing continuously, particularly in the automotive, auto components, steel, chemicals, machinery, and pharma segments.
But with these new tariffs, it seems that Indian businesses, which have been exporting things like cars, motorcycles, transport vehicles, and auto components to Mexico, will be heavily affected.
We will analyze the news below, step by step, and with great detail. 1. What Exactly Did Mexico Do?
Mexico government declared:
Tariff increases ranging from 5% to 50%
These affect thousands of goods imported from nations with which Mexico does not have any Free Trade Agreements.
India is one of those nations
The sectors that have been most affected are
Cars, Bikes, and Commercial Vehicles: Automobile
Auto components (brakes, engines, gear boxes, wheels, cables, and
Steel and metal products
Electronics and Machinery
Footwear, textiles, chemicals, and
According to Mexico’s government, these tariffs are meant at:
Protecting local Mexican manufacturers
Prote
Reducing dependence on cheaper imports
Improvement and strengthening of local production capabilities within
???? 2. Why Auto & Auto-Parts Are Hit the Hardest
India has emerged as an exporting nation for cars and auto parts.
Main factors why the effect on India will be substantial:
✔ Mexico is a Top Market for Indian Auto Exports
It ranks among the biggest importers of passenger cars from India.
Brands such as Hyundai, Kia, Suzuki, Tata Motors, and several two-wheeler makers supply heavy shipments to Mexico.
A large number of these cars and components were price competitive because previous tariffs were low.
✔ Tariff increase up to 50% kills price competitiveness
Example:
A car worth 10 lakh, exported by India with a 10% tariff rate would have cost around 11 lakh.
But with a possible 50% tariff, the landed cost would be 15 lakh.
It increases the cost of Indian cars compared with:
Those from the US
Those from the EU
Those from nations with FTA agreements with Japan
As these nations do not pay customs duty because they have a trade agreement.
✔ The auto parts industry relies greatly on exports.
India provides:
Components of an engine
Axles
Brakes
Sensors
-steering systems-
Components within the transmission
A 50% tariff might make these components prohibitive for Mexican assemblers and force them to change suppliers.
???? 3. Why Did Mexico Increase Tariffs Now?
Mexico’s raise in tariffs is also associated with larger global tensions, specifically due to:
- Protectionism
- Trade wars
3 - Nearshoring
Mexico begins to emerge as an alternative destination for manufacturers relocating from China.
To safeguard its developing sectors, Mexico requires fewer affordable imports.
- Pressure from Domestic Industries
Mexican manufacturers, particularly in:
1.
Steel
Electronics
Automobiles
have complained that foreign goods (and imports from India and China in particular) are:
• Less reliable and more
Less expensive
Mass-produced
Impacting local employment
- No FTA with India
As there is no trade agreement involving India and Mexico, Mexico can increase its duties without contravening any treaty obligations.
4.Expected Negative Impact on India
Due to its
The impact on India may be as follows:
A. Decline in Auto Exports
India supplies Mexico with tens of thousands of cars every year.
Now:
Higher tariffs = Higher prices
P1 P2
P3 P4
Less sold = less produced at Indian automaker factories for Mexico
B. Auto Component Manufacturers Hit Hard
Small and medium auto parts producers have relied on exports to:
Mexico
Brazil
South Africa
USA
Mexico represents one of the top five destinations.
Because of steep tariffs, much business will move to:
USA
Japan
Canada
South Korea
C. Potential Loss of Market Share
Market share loss is
Once a supplier loses market share in a foreign country, it becomes extremely difficult to recover it because auto supply chain agreements are entered into for a very long period.
C. Effect on Employment
During
The automotive industry alone in India employs millions of people:
Factory Workers
Assembly-line technicians
Logistics teams
Export and Sales Personnel
A decline in the number of exports might affect:
Soil utilization
So
Working hours
Future Hiring
???? 5. Which Indian Industries Are at Risk (Sector-wise)
- Cars – Biggest Effect
- Auto Components – Severe
- Steel and Metal Products
- Electrical Machinery
- Footwear, Textiles
- Plastic and Rubber Products
The tariffs make these products much more expensive in Mexico.
???????? 6. How India May
India would normally do:
✔ Diplomatic Negotiations
India might appeal to Mexico to reconsider or scale back duties.
✅ Possible new trade talks
India may make demands on:
A limited trade agreement
Trade agreements have
Broad sectoral cuts
√ Diversifying export markets
Companies can turn their attention to:
Latin America
Africa
Middle East
Southeast Asia
✔More local production within Mexico
The car manufacturers might also consider setting up assembly plants in Mexico.
Brain – 7. Big-Picture
Ejemplo de México:
Hay un patrón en todo el mundo de
There are rising levels of protectionism.
{
“_index”: “
Eliminate low-cost imports
Protect local industries
Boost local production
India, as a large exporting country, would be frequently confronted with these problems unless:
It enters into FTAs
It enhances trade relationships
Trade relationships can
It reduces dependence on sensitive markets
Because MTFN reduces
Conclusion
Mexico’s move to put tariffs as high as 50% on Indian goods imports will be a major setback for India, particularly for its automotive and auto components industries. As a result, Indian goods will be considerably more expensive in Mexico, and this will result in:
Changes in gold mining and mining production
Lack of competitiveness Lower Market Share Financial troubles for Indian manufacturers
During 2009, India The scenario will improve only if: Trade agreements which involve diplomatic efforts Increased global competitiveness Diversification of Export Destinations
