Pakistan: Huge setback for industry after 29 per cent tariff hit from US
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Islamabad, April 3 : The Trump administration has imposed a 29 per cent tariff on goods that the United States (US) imports from Pakistan, prompting experts to weigh in on the short and long-term impacts of the latest reciprocal response to Islamabad's 58 per cent tariff charge on the American goods.
US President Donald Trump has defended his decision stating that it was necessary to correct longstanding trade imbalances and unfair treatment of American products in foreign markets. Mentioning Pakistan, Trump said that Islamabad has been charging a 58 per cent tariff on American goods, which he said prompted the US to impose a reciprocal 29 per cent tariff on Pakistani products.
The decision is critical for Pakistan as the US remains one of its largest trading partners with a bilateral trade value of about 7.3 billion during 2024.
Economists see immediate hurdles for Islamabad, highlighting that one fifth of the country's exports were meant for the US.
"The US is by a significant margin our biggest market and may not be fully replaceable for Pakistani businesses," said Ali Hasnain, an Associate Professor at Lahore University of Management Sciences (LUMS).
"Pakistan should continue to seek more diverse markets for our products and, at the same time, work with other countries to join multilateral efforts to dissuade the US from staying on this course, which will shrink global trade overall and dampen economic activity moving forward," he added.
The immediate impact of US tariff imposition will be negative for Pakistan considering that the US is the country's largest trading partner. However, some experts say that this might give an opportunity to make local production more competitive.
"Trump's tariffs will have a major effect on Pakistan's textile sector. Pakistan will experience shock and low margin categories of textile will be exposed," said Maleeha Lodhi, Pakistan's former Ambassador to the US.
"Pakistan will have to see how it adjusts. The country would have to search for more markets and will have to see how it makes its exports more competitive," said Lodhi.
Sajid Amin, Deputy Executive Director at Sustainable Development Police Institute (SDPI), suggested that one has to successfully offset the immediate negative impact.
"Pakistan's tariff is less than Bangladesh and Vietnam, which can be an opportunity. But for that, we'd need to be innovative," he said.
Several analysts reckon that Pakistan's textile industry will take a major hit and may face serious challenges going forward.
Economist Adil Nakhoda mentioned that the country's exports to the US have been limited to the textile sector as the US was the single-most important market for Pakistani exports.
"Pakistan can consider increasing its exports of textile made-up products to the European Union and find ways to explore more export options for the textile industry. Pakistan will have to consider sourcing upstream textile products from the US in order to reduce this ratio as well as receive concessions on its textile products with US content," he said.
It would not be wrong to establish that the bilateral relations between the US and Pakistan have become more transactional after Trump's latest tariff announcement as there is no immediate replacement for Pakistani exports at the moment.
"Pakistan will certainly look to other countries to improve its export performance but it will take a long time to make that transition. Non-textile exports are going to suffer more. Textile exports will be helped by the fact that tariffs on competitor countries are all higher," stated Khurram Hussain, an economist.
US President Donald Trump has defended his decision stating that it was necessary to correct longstanding trade imbalances and unfair treatment of American products in foreign markets. Mentioning Pakistan, Trump said that Islamabad has been charging a 58 per cent tariff on American goods, which he said prompted the US to impose a reciprocal 29 per cent tariff on Pakistani products.
The decision is critical for Pakistan as the US remains one of its largest trading partners with a bilateral trade value of about 7.3 billion during 2024.
Economists see immediate hurdles for Islamabad, highlighting that one fifth of the country's exports were meant for the US.
"The US is by a significant margin our biggest market and may not be fully replaceable for Pakistani businesses," said Ali Hasnain, an Associate Professor at Lahore University of Management Sciences (LUMS).
"Pakistan should continue to seek more diverse markets for our products and, at the same time, work with other countries to join multilateral efforts to dissuade the US from staying on this course, which will shrink global trade overall and dampen economic activity moving forward," he added.
The immediate impact of US tariff imposition will be negative for Pakistan considering that the US is the country's largest trading partner. However, some experts say that this might give an opportunity to make local production more competitive.
"Trump's tariffs will have a major effect on Pakistan's textile sector. Pakistan will experience shock and low margin categories of textile will be exposed," said Maleeha Lodhi, Pakistan's former Ambassador to the US.
"Pakistan will have to see how it adjusts. The country would have to search for more markets and will have to see how it makes its exports more competitive," said Lodhi.
Sajid Amin, Deputy Executive Director at Sustainable Development Police Institute (SDPI), suggested that one has to successfully offset the immediate negative impact.
"Pakistan's tariff is less than Bangladesh and Vietnam, which can be an opportunity. But for that, we'd need to be innovative," he said.
Several analysts reckon that Pakistan's textile industry will take a major hit and may face serious challenges going forward.
Economist Adil Nakhoda mentioned that the country's exports to the US have been limited to the textile sector as the US was the single-most important market for Pakistani exports.
"Pakistan can consider increasing its exports of textile made-up products to the European Union and find ways to explore more export options for the textile industry. Pakistan will have to consider sourcing upstream textile products from the US in order to reduce this ratio as well as receive concessions on its textile products with US content," he said.
It would not be wrong to establish that the bilateral relations between the US and Pakistan have become more transactional after Trump's latest tariff announcement as there is no immediate replacement for Pakistani exports at the moment.
"Pakistan will certainly look to other countries to improve its export performance but it will take a long time to make that transition. Non-textile exports are going to suffer more. Textile exports will be helped by the fact that tariffs on competitor countries are all higher," stated Khurram Hussain, an economist.
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