Mexico is set to fundamentally disrupt global apparel supply chains starting January 1, 2026, with a sweeping new tariff regime. The Mexican Senate recently approved amendments to the Law on General Import and Export Duties, raising tariffs to between 35 per cent and 50 per cent on goods from non-FTA countries, specifically targeting Asian giants like China and India. This move is not just about revenue - estimated at $3.76 billion annually - but is a strategic pivot to shield domestic manufacturers and align with US trade priorities ahead of the 2026 USMCA review.
Erosion of the Asian-Mexican near-shoring model
The new policy strikes at the heart of the ‘trans-Pacific bridge,’ where manufacturers source Indian yarn or Chinese fabric to assemble garments in Mexico for duty-free entry into the US
Under the upcoming rates, yarn duties will climb toward 25 per cent, while finished garments could hit the 50 per cent ceiling. This marks a structural shift that will force a radical localization of the supply chain, notes one regional trade analyst. For Indian exporters, who currently ship roughly $410 million in textiles and clothing to Mexico annually, the increased landed costs may render mass-market categories uncompetitive, leaving only high-end niche products viable.
While the Mexican government frames this as a defense of local jobs, the broader impact serves as a catalyst for regionalized production. Brands are now pressured to source fibers and fabrics from within the North American bloc to maintain USMCA compliance. This ‘protectionist wall’ presents a dual challenge: while it offers Mexican mills a competitive edge against low-cost imports, it simultaneously raises production costs for Mexican garment exporters. As supply chains tighten, the industry must decide between absorbing these costs or embarking on a high-stakes migration toward 100 per cent regional sourcing to preserve their near-shoring advantage.
Mexico serves as a critical manufacturing hub for the North American fashion market, specializing in denim, knitwear, and technical industrial textiles. The sector is a cornerstone of the national economy, primarily serving the United States and Canada through the USMCA framework.
