India and Mexico Begin Talks on Preferential Trade Agreement

India and Mexico have initiated formal negotiations to establish a bilateral preferential trade agreement (PTA), aiming to address the challenges posed by Mexico's increased import tariffs set to take effect in early 2026. The new tariffs, which can reach as high as 50 percent on over 1,400 products, target countries without trade agreements, including India.

Commerce Secretary Rajesh Agrawal is currently visiting Mexico City for two days to sign the Terms of Reference (ToR). This document will outline the framework and scope for the upcoming discussions. The planned agreement is expected to focus on a selected group of goods, providing Indian exporters with improved access through tariff preferences in the Mexican market.

In a statement shared on the social media platform X on Tuesday, Agrawal said, "Arrived in Mexico City for a two-day visit to advance India–Mexico trade and economic ties. The visit will see the launch of PTA negotiations with the signing of the Terms of Reference (ToR), alongside engagements with the Mexican government and business community to deepen bilateral cooperation." His visit also includes meetings with Mexican officials and business leaders to explore ways to enhance economic collaboration between the two countries.

Mexico's tariff adjustments, which will come into force on January 1, 2026, span 1,463 tariff classifications. The duties imposed range from 5 percent up to 50 percent. These increases impact several important sectors of Indian exports, such as automobiles and auto components, textiles and apparel, footwear, plastics, steel, chemicals, household appliances, aluminium, toys, and engineering goods.

One notable example is passenger vehicle imports, where tariffs have surged to as much as 50 percent. This sharp rise presents a significant obstacle for Indian automakers, who consider Mexico a key export destination in the Americas. Engineering goods also represent a major portion of Indian shipments to Mexico, further emphasizing the importance of the trade talks.

In the fiscal year 2025-26, India's merchandise exports to Mexico reached $5.73 billion, with automobiles contributing approximately $1.92 billion. The total bilateral merchandise trade during this period amounted to about $7.83 billion, underscoring the growing economic relationship between the two nations.

Mexico has implemented these tariff hikes as part of a broader strategy to bolster domestic manufacturing, enhance local content in supply chains, and safeguard employment within the country. The elevated duties have triggered India's pursuit of a trade arrangement that can help restore competitive conditions for its exporters in the Mexican market.

Unlike a full-scale free trade agreement, a preferential trade agreement typically offers tariff reductions on a narrower list of products. This focused approach generally allows for faster and more straightforward negotiations, making it a practical step to address immediate trade concerns while laying groundwork for deeper ties in the future.

The upcoming discussions and the resulting PTA could play a significant role in shaping trade dynamics between India and Mexico. As both countries seek to expand their economic partnership, this agreement has the potential to ease market access barriers and promote mutual growth in key industries.