India Seeks Trade Deal With Mexico to Offset Tariff Impact

Agrawal said technical-level talks are already underway, following an online meeting this month with Mexican Deputy Economy Minister Luis Rosendo. “India has been working with Mexico since September to reach a trade agreement that can mitigate the impact quickly,” he said, without providing details on the scope or structure of the proposal. He added that “Mexico’s main objective is to avoid affecting Indian exports,” suggesting room for negotiation despite the tariff increases.

Mexico’s Senate approved the tariff hikes on Dec. 10. Analysts and private-sector representatives note that the move may also aim to ease trade tensions with the United States ahead of the US-Mexico-Canada Agreement review next year. Mexican business groups opposed the measure, warning of higher costs and potential retaliation, but the government maintains that higher tariffs will strengthen local manufacturing and reduce external dependence.

Trade data underscore the stakes. India exported US$5.73 billion in goods to Mexico in 2024, while imports from Mexico totaled US$3.01 billion. Key Indian exports include vehicles, basic metals, auto parts, and textiles. Agrawal said preliminary estimates indicate exports worth US$2 billion—across sectors such as automobiles, auto parts, textiles, steel, and iron—could be affected by the new tariffs.

Addressing the legal framework, Agrawal noted that because the tariffs are applied under most-favored-nation rules, “we do not see recourse at the World Trade Organization,” limiting India’s options to bilateral negotiations rather than multilateral dispute mechanisms.

Reuters reported last week that  the tariff increase could affect shipments worth US$1 billion from major Indian auto exporters such as Volkswagen, Hyundai, Nissan, and Maruti Suzuki. India’s auto industry had sought to prevent the hike through government engagement. In November, the Society of Indian Automobile Manufacturers urged India’s commerce ministry to press Mexico to “maintain the status quo” on vehicle tariffs and requested support in engaging Mexican authorities.

India regards Mexico as its third-largest car export market, after South Africa and Saudi Arabia, making the policy shift significant for export-dependent manufacturers. Industry data indicate that Volkswagen is the most exposed, with Skoda Auto accounting for nearly 50% of India’s car exports to Mexico. Hyundai shipped around US$200 million in vehicles, followed by Nissan at US$140 million and Suzuki at US$120 million.

Automakers emphasized to Indian officials that most exports are compact cars with engines under one liter, designed specifically for the Mexican market rather than for re-export to the United States. The industry group noted that Indian vehicles account for only about 6.7% of Mexico’s annual passenger vehicle sales and argued that they “are not a threat to Mexican local industry.”