India and Mexico Sign Terms of Reference to Begin Preferential Trade Agreement Negotiations

Key facts

• India and Mexico signed the Terms of Reference (ToR) for negotiations on a Preferential Trade Agreement (PTA), formally launching the process to expand bilateral trade and investment ties.
• The ToR was signed by Mexico's Undersecretary of Foreign Trade Luis Rosendo Gutiérrez Romano and India's Commerce Secretary Rajesh Agrawal during the latter's official visit to Mexico.
• The proposed agreement will cover market access for goods, rules of origin, customs procedures and trade facilitation, dispute settlement, sanitary and phytosanitary measures, technical barriers to trade, and trade remedies.
• The initiative follows an understanding reached between Prime Minister Narendra Modi and Mexican President Claudia Sheinbaum on the sidelines of the G7 Summit in Canada in June 2025.
• Key sectors identified for cooperation include automobiles, chemicals, electronics, pharmaceuticals, agri-food, energy, critical minerals, medical devices and advanced manufacturing, and a Mexican business mission to India was proposed for the first quarter of 2027.
• India-Mexico merchandise trade stood at $8.74 billion in 2024, with Indian exports of $5.73 billion and imports of $3.01 billion, giving India a trade surplus of $2.72 billion.
• India's key exports to Mexico included light vehicles worth $880 million, motorcycles worth $390 million, base metals worth $760 million and auto parts worth $740 million, while major imports included crude petroleum oils worth $1.7 billion, smartphones worth $270 million and gold worth $170 million.
• A PTA generally offers preferential tariff treatment on selected goods, whereas an FTA typically provides broader tariff concessions across a wider range of products.
• Mexico raised most-favoured-nation (MFN) import tariffs from 5% to as high as 50% on 1,455 tariff lines effective January 1, 2026, targeting imports from countries without free trade agreements with Mexico and also aimed at curbing Chinese imports.
• India's Commerce Ministry estimated the tariff measures could affect around $2 billion worth of Indian exports, particularly in automobiles, auto parts, textiles, iron and steel, plastics, leather and footwear.
• First proposed in September 2025 with an initial estimated impact of $3.8 billion on Indian exports, the tariff increase was deferred to August 2026 before taking effect in January 2026.
• Technical discussions on the trade agreement began on December 12, 2025, after the two sides reportedly agreed on December 2, 2025 to pursue a trade agreement to mitigate the tariff impact.