US Reduces Tariff on Pakistani Goods: Trade Deal Analysis and Implications

Washington, D.C. / Islamabad – U.S. President Donald Trump has announced new tariffs ranging from 10% to 41% on imports from around 69 countries. Among them, Pakistan’s tariff has been reduced from 29% to 19%, offering significant relief amid broader protectionist measures.

Trump stated that the move aims to fix unfair trade imbalances and protect U.S. economic and national security interests. According to the White House, Bangladesh will now face a 20% tariff, and India 25%, although discussions with India are still ongoing.

Pakistan’s Ministry of Finance confirmed the successful conclusion of a trade agreement with the United States. The deal seeks to increase bilateral trade, expand market access, attract investment, and promote collaboration in key sectors. This agreement followed visits to the U.S. by Pakistan’s Foreign Minister Ishaq Dar and Finance Minister Muhammad Aurangzeb.

The Ministry noted that the agreement will lower U.S. tariffs on Pakistani exports, particularly textiles. Initially, Trump’s administration had proposed a 29% tariff on Pakistani products, which was suspended after negotiations. It is now finalized at 19%.

What Does a 19% Tariff Mean?

In simple terms, a tariff is a tax imposed on imports, paid by the U.S. importer, not the foreign exporter. It is calculated as a percentage of the product’s value.

Journalist Shehbaz Rana explains that tariffs are imposed either to increase government revenue or protect local industries. Trump’s administration argues that cheap imports from countries like China, India, and Pakistan were harming U.S. industries and employment. The new tariffs aim to safeguard American jobs and production.

Pakistan’s Trade Balance with the U.S.

Although Pakistan runs a global trade deficit, it maintains a trade surplus with the United States:

Exports to U.S. (last fiscal year): $5.83 billion
Imports from U.S.: $1.74 billion
Net surplus: Over $4 billion

What Pakistan Exports to the U.S.

Textiles constitute around 90% of Pakistan’s exports to the U.S. Other items include:

Leather goods
Furniture
Plastic and rubber
Salt, cement, sulfur
Sporting goods
Carpets and footwear

In return, Pakistan imports the following from the U.S.:

Raw cotton
Iron and steel
Machinery and boilers
Chemicals and pharmaceuticals
Used clothing

Impact of the Reduced Tariff

Experts believe that the 19% tariff gives Pakistan a competitive edge over India (25%) and Bangladesh (20%), particularly in textile exports. According to financial analyst Sana Taufiq, Pakistan may receive more orders diverted from other countries due to the lower tariff rate.

Former TDAP CEO Zubair Motiwala noted that giving the U.S. market access to Pakistani markets poses little risk due to long shipping distances and already diverse sourcing. He said the deal strengthens bilateral trust.

Dr. Ayub Mehr emphasized that because Pakistan cannot offer subsidies (due to IMF conditions) while its competitors can, the tariff relief is especially helpful. However, for lasting impact, Pakistan needs to offer incentives to its export sectors.

Effects on Pakistan-China Relations

While this deal enhances U.S.-Pakistan relations, it may be viewed cautiously by China. Given the ongoing U.S.-China rivalry, Pakistan will need to carefully manage both alliances. The trade agreement suggests economic diversification but not necessarily a shift away from China.

Pakistan should assure China that this deal is economic, not strategic, and continue to build on the China-Pakistan Economic Corridor (CPEC).

Can Trump Be Trusted?

President Trump is known for abrupt policy changes and transactional diplomacy. He has withdrawn from trade deals, criticized allies, and shifted positions suddenly. While this agreement is promising, Pakistan must remain cautious.

Ensure the agreement is institutionalized, not just reliant on the executive branch.
Push for congressional backing or long-term frameworks.
Diversify export destinations to reduce reliance on the U.S. or any one market.

Conclusion

The reduced tariff is a positive development for Pakistan’s exporters and could strengthen economic ties with the U.S. If leveraged well, it can provide relief to Pakistan’s textile sector and increase overall exports. Diplomatically, Pakistan must maintain its balancing act between China and the U.S., while staying alert to shifts in American policy.