India is exploring options to fast-track a limited trade agreement with Mexico as new import tariffs announced by the Latin American nation threaten to significantly impact Indian exports from early 2026. The move comes amid growing concern that Mexico’s revised tariff regime could affect nearly 75 per cent of India’s exports to the country, according to a report by the Global Trade Research Initiative (GTRI).
Mexico’s New Tariff Regime Raises Alarm
Mexico’s Senate approved a new tariff structure on December 12, imposing import duties ranging from 5 per cent to as high as 50 per cent on 1,463 tariff lines. The measures apply to goods imported from countries that do not have a free trade agreement (FTA) with Mexico, including India, China, South Korea, Thailand, and Indonesia.
The revised duties are scheduled to come into effect from January 2026 and are aimed at supporting Mexico’s domestic manufacturing sector, protecting employment, and addressing persistent trade imbalances.
Impact on Indian Exports
According to the GTRI report, nearly three-fourths of India’s annual exports to Mexico—valued at approximately USD 5.75 billion—will be affected by the tariff hike. The average tariff burden on these goods is expected to rise sharply from an earlier range of 0–15 per cent to around 35 per cent.
Sectors such as automobiles, engineering goods, chemicals, pharmaceuticals, and textiles are likely to face increased cost pressures, potentially eroding the competitiveness of Indian products in the Mexican market.
India Weighs Preferential Trade Agreement
In response, India is considering negotiating a limited Preferential Trade Agreement (PTA) with Mexico rather than pursuing a comprehensive free trade agreement, which officials believe could take several years to conclude.
Commerce Secretary Rajesh Agrawal indicated that while a full FTA remains a longer-term objective, a targeted PTA could provide quicker relief to exporters affected by the impending tariffs.
Technical Talks Underway
Technical discussions between the two sides have already begun. Earlier this month, Agrawal held an online meeting with Luis Rosendo, Mexico’s Vice Minister, to explore potential trade cooperation frameworks. While specific proposals from India have not yet been disclosed, the talks signal both countries’ willingness to engage constructively amid rising trade friction.
Limited Scope for Retaliation
The GTRI report notes that India is unlikely to retaliate with counter-tariffs, given its limited leverage. India’s imports from Mexico stand at around USD 2.9 billion, significantly lower than its exports, making reciprocal action less effective.
Instead, the report suggests India may focus on export diversification strategies, seeking alternative markets to offset potential losses from Mexico.
Broader Geopolitical Context
Mexico’s decision is part of a broader global trend where countries are recalibrating trade policies to protect domestic industries amid slowing global growth and shifting supply chains. The move reflects increasing use of tariffs as a policy tool in the evolving geopolitical trade landscape.
What Lies Ahead
With the January 2026 deadline approaching, Indian exporters and policymakers face mounting urgency to secure trade concessions or alternative arrangements. A limited PTA, if concluded swiftly, could help cushion the impact of Mexico’s tariff hike and preserve India’s foothold in an important Latin American market.
For now, the outcome will depend on the pace and scope of negotiations as both sides weigh economic priorities against long-term trade relationships.