What is Reciprocal Trade?

Reciprocal trade refers to agreements between two or more countries where they provide mutual trade benefits, such as reduced tariffs or preferential treatment for goods and services.

In recent years, India has engaged in several reciprocal trade agreements with countries like the United States, European Union, Japan, and ASEAN nations to boost exports and enhance trade partnerships.

How Much Reciprocal Trade Does India Have?

As of 2024, India’s reciprocal trade accounts for 35-40% of its total international trade. Some key agreements include:
✅ India-ASEAN Free Trade Agreement (FTA) – Boosting exports in electronics and textiles.
✅ India-Japan Comprehensive Economic Partnership Agreement (CEPA) – Strengthening the automobile and pharmaceutical sectors.
✅ India-EU Trade Agreement (Ongoing Negotiations) – Expected to impact tariffs on steel, IT services, and textiles.

Impact on the Indian Stock Market

Reciprocal trade agreements have a direct impact on stock market trends:

📈 Positive Impact:

Export-oriented sectors like pharmaceuticals (Sun Pharma, Dr. Reddy's), IT (TCS, Infosys), and automobile (Tata Motors, Maruti Suzuki) see stock price surges due to increased trade opportunities.
Lower import duties on raw materials benefit industries like steel (JSW Steel, Tata Steel), reducing production costs.

📉 Negative Impact:

Domestic industries face competition from foreign goods, affecting local manufacturers.
Agricultural sectors sometimes face lower demand due to foreign competition, impacting companies like ITC (Agri-business), KRBL (Rice Exporters).

Conclusion

Reciprocal trade is a double-edged sword. While it boosts exports and foreign investments, it also challenges domestic manufacturers. Investors must track trade agreements closely, as they can influence stock movements, sector performance, and India's overall economic growth.

US Markets Soar as Trump Announces 90-Day Tariff Pause

Donald Trump announced the implementation of a 26% reciprocal tariff

Indian Stock Market Closes Higher Amid US Tariff Concerns

Stock Market Highlights: Markets crack over 1% on Trump tariff concerns; Nifty breaches 23,200