US Tariffs May Hurt Exports
US Tariffs May Hurt Exports: The increase in trade tariffs on Pakistani products announced by US President Donald Trump, though later put on hold, could badly affect Pakistan’s key exports. This has been described as a warning sign for Pakistan to start selling a wider range of products to more countries, according to a government think tank.
The Pakistan Institute of Development Economics (PIDE) said that the proposed US tariffs could seriously damage Pakistan’s export sector.
Major Economic Risks
In a strong policy note, PIDE warned the tariffs could cause big problems, including less foreign exchange, loss of jobs, and overall economic instability.
Dr Muhammad Zeshan, Dr Shujaat Farooq, and Dr Usman Qadir carried out the study titled Impact of Unilateral Tariff Increase by United States on Pakistani Exports. It looked at the effect of a possible 29% US tariff on Pakistani exports. When added to the current 8.6% tariff (Most Favoured Nation rate), the total could become 37.6%.
This could cause Pakistan’s exports to the US to fall by 20–25%, leading to a yearly loss of $1.1–1.4 billion. The textile industry would be the most affected.
Textile Sector in Trouble
In 2024, Pakistan exported $5.3 billion worth of goods to the United States, making the US its biggest single-country export market. A large share of these exports were textiles and clothing, which already face high US tariffs of up to 17%.
If the new tariffs are applied, Pakistan will lose its price advantage. This could help other countries like India and Bangladesh take over Pakistan’s market share.
PIDE warned that the damage would go beyond textiles. Big exporters such as Nishat Mills and Interloop may have to reduce their operations, putting more than 500,000 jobs at risk. The new tariffs may also hurt other important exports, such as leather, rice, surgical tools, and sports goods, and make them more vulnerable.
Use Diplomacy and Flexibility
Even with the risks, PIDE sees this moment as a chance to make smart changes. In the short term, it suggested using strong diplomacy to explain how these tariffs hurt both sides and to protect long-term trade relations.
For instance, the US exported $181 million worth of cotton to Pakistan in 2024 — this trade flow could now be in danger. Pakistan might reduce its own tariffs on US goods like machinery, scrap metal, and oil to make space for a deal. It can also support local firms in using more US-made materials like cotton and yarn to stay part of trade chains and possibly gain tariff relief.
New Markets and Products
For the longer term, PIDE recommended that Pakistan expand both its export markets and its product range. Promising regions include the European Union, China, ASEAN countries, Africa, and the Middle East.
There is potential in sectors like IT, halal food, processed food, and sports goods. PIDE also said that Pakistan must lower energy and transport costs, improve rules, and support innovation and technology. It also stressed the need for a well-thought-out trade plan with the US, focusing on technology, farming, energy, and manufacturing with added value.
Possible WTO Violation
PIDE also pointed out that the proposed US tariffs go beyond the 3.4% limit set by the World Trade Organization (WTO). This could break international trade rules.
Though Pakistan could challenge the US at the WTO, the country’s limited financial resources may make it hard to go through the legal process. More importantly, PIDE noted that these tariffs ignore how trade between countries is linked.
One key example is textiles: the US sells cotton to Pakistan, and Pakistan turns that cotton into clothes and sends them back to the US. Breaking this trade loop would hurt both countries.
Published in Dawn, 14th April 2025
