A proposed increase in US tariffs on Pakistani exports could deal a serious blow to the country’s economy, with major consequences for trade, jobs, and foreign exchange earnings, a government think tank has warned.
The Pakistan Institute of Development Economics (PIDE), in a recent policy note, said the reciprocal tariff hike — initially announced by former US President Donald Trump and later suspended — could reduce Pakistan’s exports to the United States by up to 25 per cent. That could translate into annual losses of $1.1 to $1.4 billion, primarily affecting the textile and garment sector.
The study analysed the impact of a 29 per cent additional tariff on Pakistani goods, which, when added to the existing 8.6 per cent Most Favoured Nation (MFN) duty, would bring the total tariff to 37.6 per cent. In 2024, Pakistan exported $5.3 billion worth of goods to the US — its largest single-country market — with textiles and apparel making up a significant share.
Higher tariffs could undermine Pakistan’s price competitiveness and give regional competitors such as India and Bangladesh an edge in the US market. The fallout could extend beyond textiles, affecting other sectors like leather, rice, surgical tools, and sports goods. Major exporters may be forced to cut production, threatening over 500,000 jobs.
PIDE urged the government to engage in high-level diplomacy to highlight the mutual harm the tariffs could cause. It suggested offering tariff reductions on US goods like machinery and petroleum to open space for negotiations. Encouraging Pakistani firms to use more US-origin raw materials could also help secure tariff exemptions.
In the long term, the report called for urgent diversification of export products and markets, targeting new destinations such as the EU, China, ASEAN, Africa and the Middle East. It also recommended improving energy costs, easing regulations, and investing in innovation to strengthen Pakistan’s export base.
PIDE also raised concerns that the proposed US tariffs exceed WTO limits, potentially breaching global trade rules.
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