Kolkata, India – For Pankaj Chadha, a third-generation steel manufacturer based in Mumbai, the global trade landscape has shifted from challenging to deeply precarious. After four decades building a business exporting to the United States and Mexico, Chadha is facing a “double whammy” of tariffs that have effectively halved his sales to those key markets.
“I have lost 50 percent of my business in Mexico and the US since the tariffs came into effect,” Chadha told Al Jazeera. “It is a severe blow to my business as I was focusing on Mexico after the US tariffs, but the future looks bleak there also now.”
The situation highlights a growing trend of escalating trade tensions impacting Indian businesses, particularly as they navigate a complex web of international agreements and geopolitical pressures. The initial blow came from the United States, where President Donald Trump imposed a 25 percent tariff on Indian goods in August, later increased to 50 percent in response to India’s continued purchase of Russian oil. Now, just months later, Mexico has implemented its own steep tariffs – ranging from 5 percent to 50 percent – on over 1,400 products from countries without existing Free Trade Agreements (FTAs), including India.
Mexico’s move, which took effect January 1, 2026, is officially aimed at curbing the influx of cheap Chinese imports and bolstering domestic production. However, industry observers suggest a more strategic motivation: aligning with the United States and preemptively addressing concerns about trans-shipment and supply chain diversion. The US-Mexico-Canada Agreement (USMCA) is up for review in 2026 and the Mexican government appears keen to avoid potential tariffs from Washington by demonstrating a commitment to curbing Chinese influence.
The timing couldn’t be worse for Indian exporters. While the US has signaled a potential reduction of its tariffs to 18 percent, the details remain unclear. Chadha points out a crucial difference between the US and Mexican tariffs: the US levies also impact competitors, while Mexico’s are specifically targeted at non-FTA nations, putting Indian businesses at a distinct disadvantage.
The impact is broad, extending beyond steel. India exported goods worth $5.6 billion to Mexico in 2024, with vehicles and components, and electronic equipment leading the way. Now, steel faces a 50 percent tariff, automobiles and auto components 35 percent, and even labor-intensive sectors like garments and ceramics are hit with tariffs ranging from 25 to 35 percent. Plastics, aluminum, and chemicals are also affected, with tariffs varying from 5 to 50 percent.
The automotive sector is particularly vulnerable. Indian companies exported approximately $938.35 million worth of passenger vehicles and $390.25 million worth of motorcycles to Mexico in the financial year ending March 31, 2025. Auto components, largely destined for export to the US, are facing a 35 percent tariff, impacting $835 million in exports last year, according to Vinnie Mehta, director-general of the Automotive Component Manufacturers Association of India (ACMA).
“the exports are clearly suffering due to the tariffs by the US, and the addition of Mexico has created a new challenge,” Mehta stated. “The visible impact would be clear after the end of the second fiscal cycle in March.”
The Indian government is attempting to mitigate the damage. In its annual budget presented on February 1, it allowed manufacturing units in Special Economic Zones (SEZs) to sell a limited portion of their output domestically at concessional duty rates – a move designed to offset the decline in export demand. However, industry leaders are calling for more comprehensive solutions.
Ajay Sahai, director-general of the Federation of Indian Export Organisations (FIEO), emphasized the need for diversification and increased domestic demand. “The tariffs have proved that excessive dependence on single or two countries could be harmful,” he said, “and diversification is the only solution for survival and market expansion.”
Some are advocating for a preferential trade agreement with Mexico to provide immediate relief. However, Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), suggests a broader shift in strategy. He believes India should focus on diversifying its export markets and view the tariff hikes as a symptom of a larger erosion of global trade rules, rather than a bilateral dispute to be fought directly.
While the automobile industry grapples with the new tariffs, it is also pinning its hopes on a recent reduction in India’s Goods and Services Tax (GST) from 28 percent to 18 percent, a government initiative intended to soften the blow from the US tariffs and stimulate domestic demand.
For Chadha, and countless other Indian business owners, the future remains uncertain. The Mexican tariffs represent not just a financial setback, but a disheartening blow after years of investment in building supply chains. The situation underscores the increasing vulnerability of Indian businesses to geopolitical shifts and the urgent need for a more diversified and resilient trade strategy.
