Editorial

Under the Trump Administration, the US has introduced sweeping tariffs, starting with a 10% baseline tariff on all imports, effective April 5, 2025. This move affects countries like the UK, Brazil, Australia, New Zealand, and South Africa, which face the base rate. However, the more severe measure is the introduction of reciprocal tariffs, starting April 9, targeting countries with significant trade surpluses with the US. These tariffs are calculated based on the country’s trade surplus with the US as a percentage of their imports, divided by two.

For instance, Pakistan, with a trade surplus of nearly $2 billion in 2023-24, will face a 29% tariff on its exports to the US. This is in comparison to India’s 26% and Bangladesh’s 37%. Given that the US is Pakistan’s largest export market, particularly for value-added textiles, these tariffs could substantially harm Pakistan’s export performance.

The impact of these tariffs on global trade is also alarming. The US, accounting for almost 13% of global imports, has historically maintained a low tariff regime, which has supported countries like China and those in the EU by allowing them to sustain their balance of payments and build foreign reserves. However, with the introduction of high tariffs, the risk of retaliatory measures from affected countries grows, threatening a significant contraction in global trade by 7-10%.

For Pakistan, this new trade reality presents both challenges and opportunities. While the textile sector faces a sharp price increase in the US market, leading to reduced demand, Pakistan could benefit from a relative advantage over Bangladesh. Furthermore, with China facing higher tariffs, Pakistan may find an opportunity to integrate more into China’s global supply chain, particularly in value-added textile manufacturing.

In the long run, Pakistan must reevaluate its export strategies and adapt to the changing landscape of world trade.