Mexico Boosts Car Import Tariffs to 50% for Non-FTA Markets

Mexico has increased import tariffs on passenger vehicles from 20% to 50% for countries without free trade agreements, a strategic move approved by the Senate on Dec. 10. The new duties, which take effect Jan. 1, 2026, target imports from nations including India and China and are intended to protect an estimated 350,000 industrial jobs while bolstering domestic manufacturing.

The tariff hike comes as North American partners prepare for the first joint review of the United States-Mexico-Canada Agreement (USMCA) on July 1, 2026. This review will assess the effectiveness of the agreement’s 75% regional value content (RVC) requirements in promoting regional production.

Impact on Global Automotive Exporters

The 50% duty threatens roughly US$1 billion in Indian vehicle exports. India’s ambassador to Mexico, Pankaj Sharma, said major exporters such as Maruti Suzuki, Hyundai and Nissan are among the most affected. Škoda Auto alone accounts for nearly half of India’s vehicle shipments to Mexico.

Indian industry representatives have emphasized that their exports primarily consist of compact cars with engines under 1 liter, tailored for the Mexican market rather than for re-export to the United States. Technical-level negotiations are currently underway between Indian officials and Mexico’s Deputy Economy Minister Luis Rosendo to mitigate the impact of the measure.

Mexico’s Role in North American Supply Chains

Mexico is the leading auto parts supplier to the United States, accounting for 43.38% of US auto parts imports through September 2025. The domestic auto parts sector generated US$89.24 billion in output during the first nine months of the year.

While the new 50% tariff applies only to finished vehicles, the broader trade environment is reshaping the US automotive aftermarket. Parts that comply with USMCA rules enter the United States duty-free, avoiding the 25% Section 232 tariffs imposed on non-compliant imports. This advantage reinforces Mexico’s position as a critical, tariff-exempt production hub for the region.

Consequences for Collision Repair and Consumers

US collision repair shops are already facing higher parts costs, with CCC Intelligent Solutions reporting price increases of more than 6% in 2025. These increases are often passed on to consumers, and PartsTrader estimates that tariff-related shifts could raise the parts portion of an average repair order by about US$100.

With 44% of original equipment manufacturer (OEM) collision parts sold in the United States produced overseas, volatility in global trade routes is forcing repair shops to adapt to new supply chains. Mexico’s latest tariff action signals the emergence of a “Nearshoring 2.0” phase, in which the country is aligning its trade policy to reinforce domestic industry ahead of potentially contentious USMCA negotiations in 2026.