India and Mexico Explore Preferential Trade Agreement Amid Tariff Hikes

India's Strategic Move to Counter Mexico's Tariff Increases

New Delhi: In response to Mexico's recent imposition of high import tariffs, India is advocating for a preferential trade agreement (PTA) to assist its exporters, as stated by a senior government official on Monday.

Mexico has announced significant import tariffs, varying from 5% to 50%, on approximately 1,463 goods from nations lacking free trade agreements with it, including India, China, South Korea, Thailand, and Indonesia.

Commerce Secretary Rajesh Agrawal confirmed that discussions are ongoing with Mexico regarding this matter.

"We are currently engaged in technical discussions... The quickest path forward is to pursue a PTA, as establishing a free trade agreement (FTA) would be a lengthy process. We are exploring viable options," he informed the media.

While an FTA typically involves substantial reductions or eliminations of tariffs on a wide array of traded goods, a PTA focuses on lowering or removing tariffs on a select few products.

Countries trading with Mexico cannot contest the high tariffs since they comply with World Trade Organization (WTO) regulations.

Agrawal noted that these tariffs fall within Mexico's bound rates and are not specifically aimed at India.

"We have suggested a PTA as it aligns with WTO guidelines... This would allow us to negotiate necessary concessions for Indian supply chains while also providing Mexico with concessions for their exports to India," he added.

In an effort to bolster local production and address trade imbalances, Mexico has approved an increase in most favored nation (MFN) import tariffs, effective January 1, 2026, targeting non-FTA partners across 1,455 product categories.

Initial estimates indicate that this could impact India's exports to Mexico, valued at around USD 2 billion, particularly in sectors such as automobiles, textiles, iron and steel, and footwear.

This tariff increase also aims to limit imports from China.

In 2024, trade between India and Mexico reached USD 8.74 billion, with Indian exports at USD 5.73 billion and imports at USD 3.01 billion, resulting in a trade surplus of USD 2.72 billion.

The Indian government is actively monitoring Mexico's tariff changes, engaging with stakeholders to protect the interests of Indian exporters and maintain a favorable trade environment for both nations.

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), expressed concern over Mexico's decision, particularly affecting sectors like automobiles, machinery, and textiles.

"These steep tariffs could undermine our competitiveness and disrupt supply chains that have taken years to establish," Sahai remarked, emphasizing the need for India and Mexico to expedite a comprehensive trade agreement.

According to the Automotive Component Manufacturers Association (ACMA), domestic auto component producers will face increased cost pressures due to Mexico's tariff hikes on Indian imports.