Negotiations for a free trade agreement (FTA) between India and Mexico have officially commenced, coinciding with Mexico's plans to impose significant tariff increases on imports from countries with which it does not have preferential trade agreements. These impending tariffs, potentially reaching as high as 50% on certain goods, have prompted Indian exporters to urge swift action from the Indian government to secure a trade deal that would mitigate the adverse effects on their competitiveness in the Mexican market.
Mexico's decision to raise tariffs, scheduled to take effect in 2026, targets nations like India, China, South Korea, Thailand, and Indonesia, all of which currently lack FTAs with Mexico. This move is aimed at boosting manufacturing and reducing trade imbalances, but experts suggest the decision was made under pressure from the U.S. to align with America on increasing tariffs against China and prevent trans-shipment to America. The tariffs could impact approximately 1,463 tariff lines, covering a wide array of goods.
Indian exporters have voiced concerns that the revised duties could significantly increase costs, weaken India's position against competitors with existing FTAs with Mexico, and force supply-chain realignments. They had previously alerted the Commerce Ministry on November 2nd, weeks before Mexico formally approved the tariff overhaul, about the potential disruptions across various sectors. These sectors include automobiles and auto components, engineering goods, machinery, electrical equipment, electronics, pharmaceuticals, organic chemicals, textiles, and plastics.
Mexico has emerged as a key destination for Indian engineering exports in recent years, with Indian companies steadily increasing their market share. Industry representatives caution that the proposed tariff regime could significantly raise costs and weaken India's position. Exporters are now advocating for either a comprehensive trade agreement or an interim preferential pact to be explored promptly. They are concerned that delaying negotiations until closer to the 2026 deadline could leave Indian companies with limited options to safeguard their presence in the Mexican market.
India's engagement with Mexico on this issue dates back to the initial tabling of the tariff bill. The Indian Embassy in Mexico raised the matter with the Ministry of Economy on September 30, 2025, seeking special concessions to shield Indian exports. Despite the looming tariff hikes, India has affirmed its commitment to collaborating with Mexico towards a stable and balanced trade environment that benefits businesses and consumers in both countries. The Department of Commerce is actively engaging with Mexico's Ministry of Economy to explore mutually beneficial solutions that align with global trade rules.
The terms of reference (ToR) for the FTA are expected to be finalized soon. Experts believe that a trade agreement will help protect Indian companies from these tariffs. India reserves the right to take appropriate measures to safeguard the interests of its exporters.
