India and Mexico signed the Terms of Reference for a Preferential Trade Agreement on 28 October 2026 in Mexico City, formally launching PTA negotiations. Commerce Secretary Rajesh Agrawal and Mexico’s Undersecretary Luis Rosendo Gutierrez Romano led the talks. The deal aims to protect Indian exports after Mexico raised steep tariffs on non-FTA partners.
What Is a Preferential Trade Agreement?
A Preferential Trade Agreement (PTA) is a trade deal in which two or more countries give lower import duties on an agreed list of products from each other. India and Mexico will use this limited route first to secure quicker relief, instead of waiting for a full free trade deal.
In a PTA, partners prepare a positive list. This is a fixed list of tariff lines, or product categories in the customs schedule, on which duty cuts apply. Duties may fall by a fixed margin, which is called a margin of preference, or go to zero for some items. Trade in services, investment and other areas are normally not covered.
India already uses this route with select partners. The India-MERCOSUR PTA, signed in 2004 and in force from 1 June 2009, covers around 450 products on each side. The India-Chile PTA, first signed in 2006 and expanded later, follows the same limited model. Other examples include the Asia-Pacific Trade Agreement (APTA) and the India-Afghanistan PTA.
What the India Mexico Terms of Reference Cover
The Terms of Reference (ToR) is a written roadmap for talks. It sets the goals, scope, subjects for negotiation and the way forward. India and Mexico signed the ToR during Commerce Secretary Rajesh Agrawal’s two-day visit to Mexico City starting 27 October 2026. Mexico’s Undersecretary of Foreign Trade Luis Rosendo Gutierrez Romano joined the talks on behalf of Secretary of Economy Marcelo Ebrard Casaubon.
The signing formally starts negotiations for a balanced and mutually beneficial PTA. Officials had finalised the text more than three months earlier and waited for a suitable date for the formal signing.
The ToR lists seven core negotiating areas:
- market access for goods, which means lower duties on agreed products
- rules of origin, which decide whether a product truly comes from a partner country and can claim lower duty
- customs procedures and trade facilitation, which cover faster clearance at ports
- sanitary and phytosanitary (SPS) measures, which are health and safety rules for food, plants and animals
- technical barriers to trade (TBT), which are product standards, testing and labelling rules
- trade remedies, which include action against dumping and sudden import surges
- dispute settlement, which sets how trade disputes will be resolved
The two sides named high potential sectors for closer work. These include automotive, chemicals, electronics, pharmaceuticals, agri-food, energy, critical minerals, medical devices and advanced manufacturing. Mexico sees scope for its products and firms in the Indian market, while India sees Mexico as a gateway to global value chains linked to North America.
Why Mexico Raised Tariffs and Why the PTA Matters Now
Mexico approved higher import duties for countries with which it has no free trade agreement. The Mexican Senate cleared the change on 10 December 2025 through amendments to the Law of General Import and Export Taxes. The new rates took effect on 1 January 2026.
The hike covers 1,463 tariff lines, with duties ranging from 5 percent to 50 percent. It applies to countries including India, China, South Korea, Thailand, Indonesia, Russia and Brazil. Imports from Mexico’s FTA partners, such as the United States, Canada, Japan and the European Union, keep their lower rates.
Mexico says the move will protect local industry, raise local content in supply chains and save jobs under its Plan Mexico industrial plan. The government expects about 30 billion pesos in extra revenue a year, with a limited rise in inflation of around 0.2 percent. Basic food items from these countries stay exempt through 2026.
For India, the timing is sharp. Passenger vehicles face duties up to 50 percent, against about 20 percent earlier. Auto parts face 25 to 50 percent. Steel faces some of the highest hikes at up to 50 percent, while textiles, garments, footwear, plastics, chemicals, aluminium and household appliances fall in slabs of broadly 5 to 35 percent. Pharma products fall in lower slabs of about 15 to 30 percent, but still lose price edge.
India’s Commerce Ministry estimates that about $2 billion of current shipments face direct risk, while wider studies place up to $4.66 billion of Indian exports in affected categories. That pressure explains why New Delhi pushed for early PTA talks and why Mexico has shown interest in an early harvest deal, which is a quick interim cut on select non-sensitive goods before the full PTA is ready.
India Mexico Bilateral Trade: Value, Surplus and Key Goods
Bilateral goods trade stood at $8.62 billion in 2024-25, with Indian exports of $5.75 billion and imports of $2.87 billion. India held a surplus of about $2.88 billion. Mexico was India’s ninth largest trading partner in that year and around its 21st largest export destination.
Trade has grown at about 6 percent a year since 2016, with exports rising faster than imports. India’s surplus has tripled from about $1 billion in 2015-16. Early data for 2025-26 shows exports broadly steady at $5.73 billion, while imports fell to $2.11 billion, which widened the surplus to $3.62 billion even as total trade slipped to $7.83 billion.
| Trade indicator | 2024-25 | 2025-26 |
|---|---|---|
| India’s exports to Mexico | $5.75 billion | $5.73 billion |
| India’s imports from Mexico | $2.87 billion | $2.11 billion |
| Total bilateral trade | $8.62 billion | $7.83 billion |
| India’s trade surplus | $2.88 billion | $3.62 billion |
Vehicles and parts dominate India’s export basket. Light vehicles worth about $0.88 billion, auto parts worth $0.74 billion, motorcycles worth $0.39 billion, base metals worth $0.76 billion, mechanical machinery worth $0.46 billion, chemicals worth $0.43 billion, textiles and clothing worth $0.41 billion and pharma worth $0.38 billion were among the top items in 2024. Nearly half of India’s shipments in 2025-26 came from vehicles, auto parts, electrical machinery and equipment.
Mexico’s exports to India centre on crude petroleum oils worth about $1.7 billion, along with smartphones worth $0.27 billion and gold worth $0.17 billion. Crude alone makes up about 75 percent of Mexico’s goods exports to India. Falling crude supply to India has been a key reason for the recent fall in imports.
Investment ties add depth to the trade story. More than 200 Indian companies operate in Mexico in IT, pharma, autos and food processing, with cumulative Indian investment of about $4 billion. Mexican firms have invested about $810 million in India in cinema, auto parts, IT services, manufacturing and food. Mexico ranks 44th among sources of foreign direct investment into India.
How a PTA Differs From an FTA and Other Trade Deals
Trade deals sit on a ladder. Each step adds wider coverage.
A PTA gives duty cuts on a positive list and does not cover substantially all trade. A Free Trade Agreement (FTA) removes duties on substantially all goods trade and keeps a negative list, which is a short list where duties stay. India’s FTA with Sri Lanka, in force since 2000, and the India-ASEAN Trade in Goods Agreement from 2010 are clear examples.
A Comprehensive Economic Cooperation Agreement (CECA) or Comprehensive Economic Partnership Agreement (CEPA) goes further. It bundles goods, services, investment, competition, intellectual property and customs cooperation. The India-Korea CEPA, the India-Japan CEPA and the India-UAE CEPA follow this wider model.
A customs union adds a common outer tariff against other countries. A common market allows free movement of labour and capital as well. An economic union adds shared fiscal and monetary rules. The European Union shows the deepest form of this union.
| Deal type | What it covers | List method | India example |
|---|---|---|---|
| PTA | Select goods only | Positive list for cuts | India-MERCOSUR PTA |
| FTA | Substantially all goods | Negative list for exclusion | India-Sri Lanka FTA |
| CECA or CEPA | Goods plus services, investment and rules | Broad package with chapters | India-Korea CEPA |
| Customs union | Zero duty inside plus common outer duty | Common tariff wall | Southern African Customs Union |
India now has 14 FTAs and 6 PTAs, along with wider CECA and CEPA deals. The Mexico PTA can work as a first step. If it succeeds, both sides can widen it toward a fuller FTA later.
Mexico brings a vast FTA network to the table. It has 13 FTAs with 50 countries, including the United States-Mexico-Canada Agreement (USMCA) in force from 1 July 2020, deals with the European Union and Japan, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This network makes Mexico a strong base for nearshoring, which is the shift of factories closer to the United States market.
From G7 Meeting to Talks: What Happens Next
The PTA push began at the top. Prime Minister Narendra Modi met Mexican President Claudia Sheinbaum Pardo on 17 June 2025 on the sidelines of the G7 Summit in Kananaskis, Canada. It was their first meeting. Modi congratulated Sheinbaum on becoming Mexico’s first woman President. Both leaders agreed to deepen ties in trade, investment, start-ups, innovation, science and technology, autos and people to people links.
Modi proposed joint work in semiconductors, artificial intelligence, quantum technology and critical minerals. Sheinbaum praised India’s digital public infrastructure and sought pharma cooperation, including affordable medicines and joint vaccine capacity. She also flagged interest in Indian investment for medical devices and health manufacturing in Mexico.
After that signal, officials moved fast. The ToR signing in October 2026 opened formal talks. Both sides also discussed a Mexican business mission to India in the first quarter of 2027. The mission will host business to business meetings and help firms spot deals in autos, electronics, pharma, energy and advanced manufacturing. A stronger PTA would also support resilient supply chains at a time when both countries face high tariffs from the United States.
Key Takeaways
- India and Mexico signed the Terms of Reference on 28 October 2026 in Mexico City to launch Preferential Trade Agreement negotiations.
- The ToR covers market access for goods, rules of origin, customs facilitation, SPS, TBT, trade remedies and dispute settlement.
- Mexico imposed 5 to 50 percent duties on 1,463 tariff lines from 1 January 2026 for non-FTA partners including India.
- Bilateral goods trade stood at $8.62 billion in 2024-25, with Indian exports of $5.75 billion and a surplus of $2.88 billion.
- Talks follow the Modi-Sheinbaum meeting on 17 June 2025 at the G7 Summit in Kananaskis, Canada, with a Mexican business mission eyed for early 2027.
