Trumps Tariff and Pakistan
By Dr Ashraf Chohan
Chairman PMLN UK
Chief Editor Daily Rapid Lahore
In 2024, the trade relationship between Pakistan and the United States was characterized by a significant imbalance. Pakistan exported goods worth $5.1 billion to the U.S., while importing $2.1 billion in American products, resulting in a trade surplus of $3 billion in Pakistan’s favor. A substantial portion of these exports comprised textiles and apparel, which accounted for nearly 80% of Pakistan’s shipments to the U.S.
In conclusion, the newly imposed U.S. tariffs present a formidable challenge to Pakistan’s already fragile economy. The potential decline in exports, particularly in the textile sector, threatens to exacerbate existing economic woes. While the government’s proactive approach to negotiations offers a glimmer of hope, the overall outlook remains uncertain. The situation underscores the need for strategic economic planning and diversification to mitigate the impacts of external shocks and foster sustainable growth.
However, this dynamic faced a dramatic shift in early April 2025 when the U.S. administration imposed a 29% tariff on Pakistani imports. This move was part of a broader strategy to address trade imbalances and protect domestic industries. The textile sector, being a major component of Pakistan’s exports to the U.S., is particularly vulnerable to these heightened tariffs. The increased costs could render Pakistani products less competitive in the American market, potentially leading to a decline in export volumes and adversely affecting the country’s foreign exchange earnings.
The imposition of these tariffs comes at a time when Pakistan’s economy is already under significant strain. The nation has been grappling with high inflation rates, a depreciating currency, and mounting external debts. In response to the economic challenges, Pakistan’s central bank had previously reduced interest rates from an all-time high of 22% in June 2024 to 12% by March 2025, aiming to stimulate growth. However, the recent tariffs have introduced new complexities, leading the central bank to unexpectedly halt its easing cycle, citing potential price risks stemming from escalating global tariffs.
The immediate impact of the U.S. tariffs was evident in Pakistan’s financial markets. On April 7, 2025, the Pakistan Stock Exchange experienced a sharp decline, with the benchmark index dropping over 5%, prompting a temporary halt in trading. This downturn was influenced by global market volatility and the direct repercussions of the U.S. trade measures.
Despite these challenges, Pakistani officials are seeking to turn the crisis into an opportunity. The government plans to engage in negotiations with U.S. counterparts to discuss the tariffs and explore avenues for strengthening bilateral trade relations. The aim is to present a case for mutually beneficial trade terms that could alleviate the adverse effects of the tariffs on Pakistan’s economy.
