Overview India and Mexico are currently engaged in discussions to mitigate the impact of Mexico's proposed tariff increases on countries with which it does not have a free trade agreement, including India. According to Commerce Secretary Rajesh Agrawal , these proposed tariffs could significantly affect approximately $2 billion worth of exports from India to Mexico. The primary focus is on finding a swift resolution, potentially through a Preferential Trade Agreement (PTA) . Key Developments Tariff Hike Proposal: On December 3, 2025 , the Mexican government re-submitted a proposal to its Parliament to increase tariffs to 50% on imports from countries with Most Favoured Nation (MFN) status but without a trade agreement. Parliamentary Approval: The proposal was approved by both houses of the Mexican Parliament on December 9-10, 2025 , and is now awaiting the Presidential gazette notification. WTO Framework: The tariff increases are implemented on an MFN basis, within the legal framework of the World Trade Organization (WTO) . Impact on Indian Exports: The final plan is expected to impact $2 billion of Indian exports, a reduction from the initial projected impact of $3.8 billion due to bilateral engagement. India's Response and Engagement India is actively engaging with Mexico bilaterally to find a way forward, recognizing that recourse at the WTO is limited due to the tariffs being on an MFN basis. The Embassy of India raised concerns with Mexico's Ministry of Economy , which clarified that the measure is not specifically directed against India. Bilateral Discussions: Discussions are ongoing at both the Secretary and Joint Secretary levels to explore potential solutions. Preferential Trade Agreement: A Preferential Trade Agreement (PTA) is being considered as a faster alternative to a comprehensive Free Trade Agreement (FTA) . Impacted Sectors The tariffs are expected to impact several key sectors of India's exports to Mexico: Automobiles Two-wheelers Auto parts Textiles Iron and steel Plastics Leather and footwear UPSC Relevance This situation highlights the complexities of international trade relations and the importance of bilateral agreements in mitigating trade barriers. It is relevant to GS2 (International Relations) and GS3 (Economy) , particularly concerning trade agreements, WTO regulations, and the impact of trade policies on specific sectors. Key Terms Most Favoured Nation (MFN): A principle of non-discriminatory trade treatment where countries grant each other the best trade terms they offer to any other trading partner. Preferential Trade Agreement (PTA): An agreement between countries to reduce tariffs on specific products, offering preferential access to each other's markets. Free Trade Agreement (FTA): A comprehensive agreement to eliminate or reduce trade barriers between countries, covering a wide range of goods and services.