Economists are balancing the hurdles and potential promise for Pakistan after the United States, headed by President Donald Trump, hit Pakistani products with a sharp 29% duty. It occurred as part of a broader escalation in global trade tensions, with tariffs placed on several other nations, ranging from rivals to close friends.
In accordance with a chart shown by President Trump, the 29% reciprocal duty on Pakistan had been a measure taken in response to the 58% tariffs Pakistan supposedly imposes on US exports.
Ali Hasanain, a professor at the Lahore University of Management and Science, said that whereas the US is Pakistan’s largest trading partner, with some 20% of exports, Pakistan’s exports to the US represent only some 1.5% of Pakistan’s GDP. “Even in a worst-case scenario, the damage would be less than the economic damage caused by internal mismanagement,” he noted.
He further emphasized that the bilateral trade relationship is significant but short-term matters such as US support for Pakistan’s IMF program are more immediate. He holds the view that the effect of the tariff on diplomatic relations will be minor.
Analysts anticipate a global redistribution as countries, including Pakistan, look for alternative markets. Nevertheless, the US will still be Pakistan’s biggest market, and a full replacement will not be easy.
SDPI’s Sajid Amin cautioned of short-term negative effects, advising Pakistan to cut the cost of production or subsidize exports—steps the IMF would be opposed to. He further explained that the tariffs create a problem but also provide a chance for innovation and smart adjustments in trade.
Economist Adil Nakhoda explained that the textiles, which constitute the majority of Pakistan’s exports to the US, would be impacted the most. He recommended targeting the markets in the EU and using US-sourced raw materials in a bid for concessions.
Other commentators, including Khurram Husain and Maleeha Lodhi, laid greater stress on the transactional imperatives of US-Pakistan relations and the imperatives of increasing export competitiveness.
Michael Kugelman emphasized the susceptibility of Pakistan’s textile industry, and Topline Securities documented that Pakistan accounts for a mere 0.16% of US total imports, yet that’s 18% of Pakistan’s exports. The tariffs target major exports such as textiles, leather, and rice, and position Pakistan in a precarious position with regards to the likes of India and Vietnam, some who are subject to even higher levies.