Web Desk
On April 2, 2025, U.S. President Donald Trump delivered remarks in the Rose Garden of the White House, announcing the imposition of a 29% tariff on goods imported from Pakistan, alongside new tariffs on numerous countries ranging from rivals to allies.
The announcement is part of a broader strategy to adjust the global trade balance and is expected to intensify the ongoing trade conflict.
Reciprocal Tariffs: A Shift in U.S.-Pakistan Trade Dynamics
Trump’s administration is targeting nations with which the U.S. has trade imbalances.
Pakistan, which levies a 58% tariff on American goods, is now facing reciprocal tariffs of 29% on its exports to the U.S.
This move marks a significant shift in the trade dynamics between the two countries.
Economic Impact of the Tariffs on Pakistan’s Economy
Economists are assessing the potential impact of this new tariff policy on Pakistan’s economy.
Ali Hasanain, an associate professor of economics at LUMS, explained that although the U.S. is one of Pakistan’s largest trade partners, it still remains a relatively minor part of the country’s GDP.
Exports to the U.S. represent about 18% of Pakistan’s total exports, but these make up only 1.5% of the country’s GDP.
Hasanain further emphasized that even if the U.S. were to cut off imports entirely—which is highly unlikely—the long-term impact would be far smaller than the economic damage Pakistan has already faced due to internal mismanagement.
Exploring Alternative Markets for Pakistan’s Exports
While U.S.-Pakistan trade relations may remain stable, the imposition of tariffs signals a global shift in trade patterns.
Countries will now explore alternative markets to diversify their trading portfolios, but for Pakistan, the U.S. is still by far the most important export destination.
This leaves Pakistani businesses with limited options for quick replacements.
Immediate Challenges Faced by Pakistan’s Economy
Sajid Amin, an economist and deputy executive director at the Sustainable Development Policy Institute, highlighted the immediate challenges Pakistan faces as the U.S. is its largest trading partner.
He mentioned that to offset the tariffs, Pakistan may need to subsidize local production to make its goods more competitive.
However, the key challenge here would be whether the IMF would permit such subsidies under its current policies.
Long-Term Implications of U.S. Tariffs on Pakistan
The long-term impact of the tariffs remains uncertain.
Amin explained that while Pakistan’s tariffs are lower than those of countries like Bangladesh and Vietnam, the country would need to innovate and find ways to remain competitive.
This would be crucial if Pakistan hopes to mitigate the impact of the tariffs and maintain its trade position on the global stage.
Challenges to Pakistan’s Textile Industry
Adil Nakhoda, a professor at the Institute of Business Administration in Karachi, agreed that Pakistan’s textile sector would face significant challenges due to these tariffs.
The textile industry is the largest sector of Pakistan’s exports to the U.S., and with the new tariffs, this sector could suffer the most.
Nakhoda suggested that Pakistan could consider increasing textile exports to the European Union to diversify its market base and reduce its dependence on the U.S.
The Global Trade Shift and Its Effect on Pakistan
The broader context of the tariffs was also addressed by Khurram Husain, a business and economic journalist, who pointed out that the imposition of tariffs would make the relationship between Pakistan and the U.S. “even more transactional.”
He acknowledged that while Pakistan would look to other markets, replacing the U.S. as the primary export destination would take a long time.
He also noted that the U.S. and the European Union remain the most significant markets for Pakistan, making it difficult for Pakistani exporters to quickly pivot to other countries.
Impact of Tariffs on Pakistan’s Export Strategy
Former ambassador to the U.S., Maleeha Lodhi, further commented on the potential impact of the tariffs.
She stressed that while Pakistan would certainly be affected due to its heavy reliance on the U.S. for textile exports, the country would need to focus on making its exports more competitive.
Lodhi also highlighted the need for Pakistan to explore new markets and strengthen its trade relationships outside of the U.S.
Pakistan’s Textile Sector: Facing Global Trade Pressures
Michael Kugelman, an expert on U.S.-South Asia relations, remarked that the new tariffs would have a significant impact on Pakistan’s textile sector, which is already facing challenges due to the global trade environment.
He added that Pakistan, along with Bangladesh and India, would likely face economic stress from the U.S. tariffs, particularly in the textile industry.
Pakistan’s Exports: Small Percentage but Vital to the Economy
According to Topline Securities, Pakistan’s exports to the U.S. account for only 0.16% of total U.S. imports, amounting to approximately $6 billion annually.
Despite the small percentage of U.S. imports, this remains a vital market for Pakistan, as it represents a significant portion of the country’s total exports.
The textile sector alone comprises 75-80% of this export volume, making it especially vulnerable to the new tariffs.
Global Competitors Face Even Higher Tariffs
The research also noted that countries like Vietnam, Bangladesh, and China are facing even higher tariffs, which could provide Pakistan with some respite, as its competitors in the textile sector are being hit harder.
However, India, which competes with Pakistan in textile exports, enjoys a slight tariff advantage, which could put additional pressure on Pakistan’s market share in the U.S.
Adapting to New Global Trade Realities
While Pakistan’s economy, particularly its textile sector, will face challenges due to the U.S. tariffs, there are still opportunities for the country to diversify its export markets and innovate in order to remain competitive.
However, the process of finding alternative markets and adjusting to the new global trade environment will require careful planning and time.
The imposition of tariffs on such a broad range of countries also suggests that global trade patterns will continue to evolve, and Pakistan must remain adaptable in navigating these changes.
