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India and Mexico Begin Preferential Trade Talks Amid Rising Tariff Pressures

India and Mexico have initiated discussions on a Preferential Trade Agreement (PTA) as New Delhi seeks to safeguard its exports from steep tariff hikes imposed by Mexico on countries without existing trade agreements. The move reflects India’s broader strategy of using targeted trade pacts to protect key export sectors while deepening economic engagement with strategic global partners.


The talks come at a critical time, as Mexico prepares to implement higher import duties on a wide range of products beginning January 1, 2026, a decision that could significantly impact Indian manufacturers and exporters.


India’s imports from Mexico last year were $ 3.01 billion. It has a trade surplus of $ 2.72 bn. Indian companies have also invested in Mexico in large numbers | Financial Express
India’s imports from Mexico last year were $ 3.01 billion. It has a trade surplus of $ 2.72 bn. Indian companies have also invested in Mexico in large numbers | Financial Express

Background to the Trade Negotiations

Mexico recently revised its tariff framework, raising Most Favoured Nation (MFN) duties on more than 1,400 tariff lines, with rates ranging from 5 percent to as high as 50 percent. These higher tariffs apply to imports from countries that do not have a free trade agreement with Mexico, including India. Mexican authorities have justified the move as an effort to support domestic industry and address trade imbalances.


Since the tariffs fall within Mexico’s commitments under the World Trade Organization, affected countries have limited scope for legal challenge. As a result, India has opted for bilateral engagement, identifying a PTA as the fastest and most practical mechanism to reduce the impact on its exporters.


What a Preferential Trade Agreement Would Mean

Unlike a comprehensive Free Trade Agreement, which can take years to negotiate, a Preferential Trade Agreement focuses on select product categories, allowing quicker implementation. Indian officials have indicated that the PTA would aim to secure tariff concessions on goods where India has strong export interests, while also offering Mexico improved access to the Indian market in mutually agreed sectors.


Technical-level discussions between the two governments have already begun, with both sides assessing product coverage, tariff structures, and rules of origin. The emphasis is on creating a balanced framework that delivers immediate relief while laying the groundwork for deeper economic cooperation in the future.


Economic Stakes for India

India’s trade relationship with Mexico has grown steadily over the past decade. Bilateral trade currently stands at nearly USD 9 billion, with India enjoying a healthy trade surplus. Indian exports to Mexico are valued at around USD 5.7 billion, dominated by automobiles, two-wheelers, auto components, engineering goods, textiles, chemicals, plastics, iron and steel, and pharmaceuticals.


Government estimates suggest that close to USD 2 billion worth of Indian exports could be adversely affected by Mexico’s new tariff regime if no preferential arrangement is reached. Sectors such as automobiles and auto components are particularly vulnerable, given Mexico’s role as a key manufacturing and export hub linked to North American supply chains.


Industry Concerns and Strategic Implications

Indian industry bodies have expressed concern that higher tariffs could erode competitiveness, disrupt established supply chains, and reduce India’s footprint in the Latin American market. Manufacturers have also warned that increased costs could weaken India’s position in sectors where price sensitivity is high and competition from countries with existing Mexican trade agreements is intense.


From a strategic standpoint, the negotiations also reflect shifting global trade dynamics. Mexico’s tariff changes are part of a broader recalibration ahead of future reviews of the US-Mexico-Canada Agreement (USMCA), while India continues to expand its network of trade partnerships to diversify export destinations and reduce dependency on a few markets.


Diplomatic Engagement and the Road Ahead

Indian officials have stressed that Mexico’s tariff measures are not directed specifically at India and have highlighted the constructive nature of ongoing dialogue. Recent high-level meetings between commerce officials from both countries have reinforced the commitment to finding a mutually acceptable solution.


The success of the proposed PTA will depend on the speed and flexibility of negotiations, as well as the willingness of both sides to accommodate sensitive sectors. While a PTA would not replace the long-term benefits of a full Free Trade Agreement, it could provide crucial short-term relief and help maintain momentum in bilateral trade relations.


The MGMM Outlook

India’s move to begin preferential trade talks with Mexico reflects a timely and calculated effort to protect Indian exporters from the sharp tariff increases Mexico plans to implement from January 2026. With higher MFN duties set to apply to countries without trade agreements, the negotiations aim to secure targeted tariff relief for key Indian export sectors such as automobiles, engineering goods, pharmaceuticals, textiles, and chemicals. Rather than pursuing a lengthy free trade agreement, the focus on a Preferential Trade Agreement signals an emphasis on speed and practicality, allowing both sides to quickly address immediate trade risks while keeping broader economic cooperation open for the future.


The talks also underline the growing strategic importance of India–Mexico trade ties, especially as global supply chains and regional trade blocs undergo realignment. With nearly USD 9 billion in bilateral trade and a significant surplus in India’s favour, the potential impact of higher tariffs could weaken India’s competitiveness in the Latin American market if left unaddressed. By engaging Mexico through focused negotiations, India is reinforcing its broader trade strategy of safeguarding exports, maintaining access to critical markets, and adapting to an increasingly protectionist global trade environment while sustaining momentum in bilateral economic relations.



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