India and Mexico Open Trade Pact Talks as New Tariffs Bite Into $5.7 Billion of Exports

India and Mexico are set to formally begin negotiations for a preferential trade agreement (PTA) this week, in a move aimed squarely at softening the blow of steep new Mexican import tariffs on Indian goods. Commerce Secretary Rajesh Agrawal is in Mexico City for a two-day visit that began on Monday, 26 October, and the centrepiece of the trip is the signing of the Terms of Reference (ToR) — the document that sets the framework, scope and ground rules for the talks.

Announcing the visit in a post on X on Tuesday, Agrawal said it would see the launch of PTA negotiations with the signing of the ToR, alongside meetings with the Mexican government and business community. A preferential trade agreement is narrower than a full free trade agreement: instead of opening everything, the two sides pick an identified list of goods and cut or eliminate duties on those lines first.

Why now: a tariff wall that went up in January

The urgency comes from Mexico's side of the border. From 1 January 2026, Mexico raised import duties across 1,463 tariff classifications, with rates ranging from 5 per cent to 50 per cent, aimed at countries that do not have a trade agreement with it — a group that currently includes India.

The increases land directly on the backbone of India's exports to Mexico: automobiles and auto components, textiles and apparel, footwear, plastics, steel, chemicals, household appliances, aluminium, toys and engineering goods. Passenger vehicles are among the hardest hit, with import duties rising to as much as 50 per cent — a serious problem for Indian automakers that treat Mexico as a significant export market, and for the engineering goods makers who account for a substantial share of shipments.

The numbers behind the urgency

India's merchandise exports to Mexico stood at $5.73 billion in 2025-26, and automobiles alone accounted for roughly $1.92 billion of that. Total bilateral merchandise trade was about $7.83 billion in the year, with imports from Mexico of around $2.1 billion — meaning the trade balance runs in India's favour, and Indian exporters have the most to lose if the new duties stay unchallenged.

That arithmetic explains the speed of the response. Every month without an agreement is a month in which Indian cars, fabrics, steel and machinery compete in Mexico carrying duties of up to 50 per cent that rivals with trade deals do not pay.

An early harvest is on the table

Commerce and Industry Minister Piyush Goyal has said Mexico is keen on an early-harvest arrangement — an interim deal that liberalises trade in selected goods where neither side has major sensitivities, without waiting for the full agreement to be negotiated line by line. If the two sides take that route, relief for the least controversial products could arrive well before a comprehensive PTA is concluded.

The ToR signing during Agrawal's visit is the step that turns that intention into a formal process: it fixes what the negotiations will cover and how they will be conducted, after which officials can begin identifying the specific products on which tariff concessions can be exchanged.

Part of a wider trade push

The Mexico opening is one track in a crowded Indian trade calendar. Goyal has described a prospective deal with Chile as quite ripe for conclusion, said negotiations with Canada are making very good progress — with a sixth round of talks on a comprehensive economic partnership expected in early November — and noted that discussions with the Southern African Customs Union have only recently begun. An expansion of India's existing preferential arrangement with the Mercosur bloc in South America is also under discussion.

What happens next

With the framework signed during this visit, the work moves to negotiators: drawing up the product lists, testing each side's sensitivities, and deciding whether an early-harvest package can be carved out quickly. For Indian exporters, the measure of success will be simple — how soon the duties that rose in January start coming back down on the goods they actually ship. MagnetDaily will follow the rounds as they are announced.