By Muhammad Ishfaq for Invisiblites
Since the beginning of Donald Trump’s second term as President, his bold and unapologetic policies have caused turmoil across various regions of the world. The impact of the recently announced tariffs stretches across the globe. The President is determined to complete the unfinished agenda of his first term and is moving forward aggressively under his “America First” policy. He is also fully committed to his election promise of stopping illegal immigration. Not only has he made it significantly harder for illegal immigrants to enter the U.S., but he has also been actively deporting those already present in the country. A full scale trade war is happening right now, routing global markets and making every business owner rethink their strategy.
The American President has announced a universal tariff and Pakistan was not spared. A 29% tariff has been imposed on Pakistani exports. This is a major blow, as the United States is Pakistan’s largest export destination. Just last year, Pakistan exported goods worth $6 billion, mostly textiles and garments to the U.S. This move will not only hurt Pakistan’s exports to the U.S. but also impact its overall net exports. Pakistan is already facing large trade and current account deficits. The country’s foreign exchange earnings are already teetering at the edge. As a result of the recent tariffs, Pakistan could face a further deterioration in its forex reserves, a worsening trade deficit, rising inflation, and increased pressure on the common citizen.
Increased Exports
However, on one hand, the tariff war may harm Pakistan, but on the other hand, it can also be turned into an opportunity. In the global market, Pakistan’s main competitors except India like Bangladesh, Vietnam, and Sri Lanka —are facing even higher tariffs from the U.S. compared to Pakistan. For instance, the U.S. has imposed a 37% tariff on Bangladeshi exports, 46% on Vietnamese imports, 26% on Indian exports, and 44% on Sri Lankan products, while Pakistan is currently facing a 29% tariff. This means products from these countries will become more expensive in the U.S. market. That creates a gap which Pakistan can fill by offering competitive alternatives, potentially increasing its export share and strengthening its trade ties with the U.S.
Reduced Imports
Another potential advantage for Pakistan arises from the global drop in oil prices. Due to the reduced demand triggered by the ongoing trade war, the global market is experiencing instability, leading to a significant decline in oil prices. For Pakistan being a net oil importer, this drop in oil and other energy product prices works in its favor. Additionally, OPEC countries have hiked up production, pushing prices even lower. Regardless of how low oil prices go, Pakistan stands to benefit through a reduced import bill. To illustrate, Brent crude prices recently dropped by 6.42%, falling to $70.14 per barrel, while WTI fell by 6.64%, reaching $66.95 per barrel. Based on 2024 estimates, Pakistan imported around 154 million barrels of petroleum products, with a total import bill of approximately $17.5 billion USD. With Brent Crude prices dropping by $4.86 per barrel, Pakistan could potentially save nearly $750 million USD this year alone. This would provide much-needed relief to Pakistan’s economy by reducing pressure on foreign reserves and improving the trade balance.
Filling Workforce Gap
A third potential benefit of Trump’s policies for Pakistan is linked to his aggressive crackdown on illegal immigration. Nearly 100,000 undocumented immigrants have already been deported, with a large-scale operation underway to remove many more. This will create a significant labor gap in various U.S. service sectors. As opportunities open up, Pakistan being a country that already exports a large portion of its workforce in the form of services can step in to fill this gap. Compared to other competitors, Pakistan has a growing services export sector and can benefit by sending skilled labor through legal channels. This could lead to millions of dollars in foreign remittances and help boost Pakistan’s economy.
Going Forward
However, Pakistan can only truly benefit from these opportunities if it takes concrete steps through smart policy-making and proactive diplomacy. The government must introduce necessary reforms, engage its embassies and consulates in the U.S., and activate its commercial attachés and trade ministers to negotiate favorable deals with American authorities. Through such efforts, Pakistan can legally send its skilled and semi-skilled workers to fill the labor gap created by mass deportations and the shortage caused by higher tariffs on competing countries like Vietnam and Bangladesh.
At the same time, Pakistan should move quickly to capitalize on the trade gaps emerging in sectors like textiles and garments. This means offering targeted subsidies, especially in garments and cotton-based industries, reducing electricity costs for manufacturers, and improving ease of doing business. With the Pakistani rupee already having devalued, these steps can help make Pakistani products more competitive globally and attract international buyers. If done right, this could serve as a turning point for Pakistan’s struggling economy. Through all these major measures, Pakistan can not only mitigate the negative impact of the tariffs imposed on it but also turn the situation into an opportunity for growth and economic advancement.
The writer is a student of International Relations at the National Defence University, Islamabad.
Photo credits: Flickr via Creative Commons