India May Use Mexico FTA to Bypass US Tariffs on Steel and Auto Exports

Indian exporters are lobbying for a Free Trade Agreement (FTA) with Mexico to help bypass high US tariffs on steel and automobile exports. This approach could offer tariff advantages by routing goods through Mexico, leveraging existing trade benefits under US agreements, as per the Moneycontrol report.

Why Indian Exporters Seek a Deal with Mexico Now

With US tariffs on Indian steel and auto parts as high as 50% and 25%, respectively, exporters fear continued limitations despite upcoming trade talks. As India’s mini-deal with the US appears unlikely to include full exemptions, industry voices suggest using Mexico’s existing trade framework with the US as a backdoor access route.

Leveraging the USMCA Through Mexico for Lower Tariffs

Mexico, being a signatory to the United States-Mexico-Canada Agreement (USMCA), offers certain export advantages. Products that undergo sufficient value addition in Mexico and meet USMCA rules can attract lower duties or qualify for limited exemptions. By exporting to Mexico first, Indian goods could then be re-exported to the US at reduced or no tariffs.

Mexico as a Strategic Manufacturing Hub

Several Indian steel and auto exporters believe a deal with Mexico could benefit both sides. Mexico's ancillary industries can undertake further processing of Indian inputs. These goods, when exported to the US under quota-based exemptions, may enter the American market at significantly reduced rates even while quotas persist on Mexican-origin goods.

Read More: Trump Announces Tariff Letters to 12 Nations: Trade Talks with India in Progress!

Current Duties and Future Prospects

Without an FTA, Indian goods face steep entry barriers in both the US and Mexico. Imports into Mexico from India are taxed between 5.5% to 50%. A trade pact could drop these rates and provide a workaround for accessing the US. While exploratory studies were underway as of 2023, no formal talks have begun yet.

Conclusion

The India–Mexico FTA proposal aims to counter the trade challenges posed by steep US sectoral tariffs. By utilising Mexico’s trade links with the US, Indian exporters seek tariff relief and broader market access, especially in the steel and automobile sectors currently under pressure.

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