The 75% Death Blow for Exports

The export's cost has increased by 35%, overnight For a lot of indian companies this will mean exiting the marketplace as the tariff wall erected by Mexico, at the beginning of January 1, 2026 which places 50% import duties on goods not covered by Free Trade Agreements FTA's, applies to approximately 75% 5.75 billion of India's total exports to Mexico India's former growth market will now feel like quicksand. Autos disappeared, smart phones are now blocked, and steel has been rendered viable. Rerouted supply chains have now become visible to exporters, as their competitors are profiting from them.

The Tariff Trigger: Mexico Joins the US and Does Not Share Tariff Duties With Other Countries That Have Free Trade Agreements with Us

To safeguard the automotive and manufacturing sectors from the dangers posed by nearshoring, Mexico has implemented a 5% to 50% rise in its tariffs on these items. GTRI has outlined the extent of this impact on 75% percent of its business. This figure is not exaggerated.

Most Affected Sectors

• Passenger Vehicles ($938 Million) 20% → 35%
• Auto Parts ($507 Million) 10%-15% → 35%
• Motorcycles ($390 Million) 20% → 35%
• Smartphones 0% → 35% (Market Closed)
• Steel Flat Products → 50% (Non-Viable)
• Machinery ($548 Million) 5%-10% → 25%-35%

13031. garment ($246 million) and textile industries follow in the same range (25%-35%) while the pharmaceutical industry ranges from 0%-10%. Mexico's imports from India ($2.9 billion) will provide no retaliation leverage.

Business Fallout: Destroyed Margins, Job Losses

Landed costs will skyrocket and an auto shipment worth $10,000 will now have a duty of $3,500. Due to this Mexican customers will look to switch their business to USMCA partners.

 

Ripple Effect

As a result of this tariff change, companies like Maruti Suzuki exporters will cut their volume of business to Mexico by 60-70%, tvs motorcycles will now pivot their shipping to ASEAN countries and steel mills will be forced to potentially idle capacity.

Job Numbers

There is an estimated 2-3 lakhs of direct employment impacted in the automotive/textile supply chain, MSME's (micro, small and medium enterprise's) represent approximately 80% of Indian exporters and are experiencing cash shortages and delayed payments. The Q1 FY27 GDP drag will be ~0.2-0.3%.

Trump's Shadow

The upcoming tariffs from Mexico on US products are more than twice as high as the base tariffs imposed by the United States on Mexico. Which means that the tariffs proposed by Mexico are 75%, which are 50% higher than the reciprocal traffic imposed by the United States.

 

Examples of these stacked tariffs are a 25% reciprocal increase for crude oil from Russia and a further 25% increase on imports from Iran due to the nuclear sanctions put in place against Iran.

 

At this level, products like gems, shrimp and leather are simply not viable for Mexico to produce because they cannot be produced for a profit due to these tariffs. Specifically pharmaceuticals hold a competitive advantage in that by the time you are at a 75% total tariff not much will be produced by countries outside of Vietnam (i.e., 15% duties) that can steal market share or exports from Mexico.

 

In addition, with the decline in "World Trade Organization" (WTO) mandates, India is scrambling to develop a more diverse base of market opportunities for its products rather than relying on only one geographical area as in the case of Vietnam.

Plan of action for Exporters to Survive the Next Few Years

1. Switch to diversifying your market place immediately

2. Leverage existing domestic market businesses

3. Establish additional 10 (new) exports or export locations to target $1b and to replicate Mexico.

4. Take advantage of the current government urgency

5. Consider and develop FTA's with other countries

6. Maximize the economic return of the export incentive program in d/c and the u.s.-canadian trade agreement.

7. Monitor Weekly for Continued Milestones of "increased trade" with "E.U." and/or "emerging markets".

Budget FY27 Predictions

Export Incentives to ₹1.2L cr. Future FTA Closure with the United Kingdom and Oman. Monitor U.S.-Iran Fallout Weekly.

 

Overview of Various Sectors: Automotive Industry Leads the Pain.

 

Automotive (25% of exports) - The collapse of deep supply chains in Mexico. Manufacturers like TVS and Hero are now changing their focus to Brazil, and EVs are relatively less affected at 25% duty.

 

Electronics - Smartphones are a done deal. Manufacturers are moving to Vietnam as they lack sufficient production capacity.

 

Steel - Flat products are flat. Long products remain capped at 25%.

 

Pharma has steady volume and in the absence of generics continues to fill the gap. Ceramics and machinery are fighting to hold up margins through volume and increased use.

Long Term: Resilient Supply Chains Will Prevail

It hurts but exposes the risk of overdependence with a death blow to 75%. Mexico produced 1.5% of $450B in exports, therefore companies must build deeper diversities.

 

Companies who adapt to changing environments will thrive. Maruti will now be looking to penetrate Africa with automobiles, and textile MSMEs will continue to pursue sourcing to Bangladesh.

 

In Q4 orders show Mexico will be down 40% but ASEAN will experience a 25% growth. If companies are taking steps to contain net losses.

 

Exporters: conduct audits of their exposure now. Reroute even one container. Governments are to expedite Free Trade Agreements (FTAs). It can be said that through sheer determination we successfully avoided a death blow. The next order will come from markets that have not yet been tapped.