Trump Tariffs on Pakistan: A Turning Point in Pak-US Relations

On April 2, 2025, US President Donald Trump announced new reciprocal tariffs, including a hefty 29% tax on Pakistani merchandise imports. This new scheme was part of Trump’s “Fair and Reciprocal Plan,” popularly known as “Liberation Day” in US trade policy, for which the American president’s administration has been showing a dramatic escalation of the protectionist agenda.

You will find more infographics at Statista

For Pakistan, a country heavily dependent on the US as a key trading partner, this move could upend economic dynamics and further strain an already complicated bilateral relationship. As the dust settles on this daring policy shift, the implications for Pak-US relations are profound, multifaceted, and potentially transformative.

The Trump Tariffs Announcement: A Strategic Blow

Trump’s imposition of a 29% tariff on imports from Pakistan is a direct response to what he considers an unfair trade imbalance. In the course of announcing the tariffs, he referenced the 58% tariff that Pakistan imposes on imports from America as justification for this countermeasure, arguing that such imbalances have long placed the US economy at a disadvantage. This tariff, effective April 9, 2025, will also impose an additional burden on Pakistan as it completes its journey from a universal 10% tariff that begins on April 5. In 2024, bilateral commerce is estimated at $7.3 billion and will set the stage—with $5.1 billion ringing up for Pakistani exports to the US. In turn, the stakes are high.

The textile sector constitutes about 80% of the Pakistani export basket to the US. The new tariff threatens to cut Pakistani textile exports by $1-2 billion, a severe toll on an already stressed economy that faces huge structural problems, energy costs, and limited export platforms. The immediate economic impact could include loss of jobs in the textile sector, depreciation of the rupee, and a higher trade deficit, further worsening financial vulnerabilities for Pakistan, especially when it needs $26 billion for external financing for FY25.

Economic Ripples of the New Tariffs: Beyond the Numbers

In fact, nearly 19% of Pakistan’s total exports in the first half of FY25 (July to December 2024) were directed towards it. The United States is indeed a significant market for Pakistan’s exports. As a result, American importers work out costs. They might even switch to alternative suppliers like Indian, Bangladeshi, or Vietnamese suppliers—countries that have tried to benefit from trade diversions and US-China tariff wars. For example, during Trump’s first term, Indian and Bangladeshi exports to the US increased by 39% and 50% by the end of his second term, respectively, while Pakistani exports dropped by 3%. If this is repeated, Pakistan’s global competitiveness will really take a hit.

The tariffs also have the potential to alter Pakistan’s import dynamics further. Consequently, a stronger dollar, which boosts the US economy due to trade policies initiated by Trump, lowers the global pricing of commodities, making imports in Pakistan cheaper. However, shadowing this glimmer of hope stands with the possibility of tit-for-tat retaliation or reduced demand in the US market. The gains could, of course, be nullified. The pressure on the Pakistani government to stabilize its economy would increase still further; it would have to pivot quickly towards new markets and lower production costs on short notice, negotiating trade concessions in some cases to clear up the haziness of the hell.

Pak-US Relations: A Fragile Bond Tested

Tariffs are being imposed in a very fragile state of relations between Pakistan and the US. This partnership has oscillated from cooperation to contention, from strategic alignment (especially during the Cold War and post-9/11) to periods of distrust (when issues of Afghanistan and counterterrorism policies matured). In recent years, American military and economic aid tapered off: Pakistan is on track to receive a mere $21 million in budgeted USAID grants for FY25 and so on to those external needs. The decision on tariffs compounds the strain, announcing an apparent shift from diplomatic engagement toward economic confrontation.

Pakistan should respond. Former Ambassador Maleeha Lodhi was adamant that export performance hinges on reforms at home rather than trading tweaks abroad, urging Islamabad to diversify its market and broaden its export base. However, the political response might be a defiant stand. If Pakistan decides upon retaliatory tariffs – a decision mostly inhibited due to limited scope for leverage – it could exacerbate issues, but the retaliatory measure seems unlikely considering the disparity in trade dependence. Perhaps Pakistan would mold the diplomatic channel for getting an exemption or shift to phased implementation, using its leverage over South Asia as well as on regional issues like counterterrorism.

The US, for one, might see tariffs as a bargaining chip. The Trump administration linked trade policies with larger agendas, for instance, countering illegal immigration and drug trafficking (like fentanyl). However, Pakistan is less embroiled in these issues than Mexico or China. Both parties might, however, see tariffs as a way to leverage Pakistan toward greater alignment with US strategic interests, thereby reviving talks on security cooperation or regional stability for economic relief.

Broader Implications: A Global Trade War Looms

It is not Pakistan, of course, that bears the Trump tariff onslaught alone: around sixty other nations, with rates going as high as 49% for some countries, are covered under the policy. Also included are behemoths such as China, which has an effective 54%, and the European Union at 25%. Thus, this global increase could lead to a trade war, with reverberations that could complicate Pakistan’s position even further. As big international players such as China and the EU would retaliate – the former having already pledged countermeasures – global supply chains would likely fragment. Pakistan would probably be caught on the wrong side, attempting to adapt to shifting trade dynamics.

The impact of tariffs goes beyond Pak-US relations; they signify a paradigm shift in these traditional alliances to something more transactional and America-first. Though the dominant economic power, the US would shun partners like Pakistan with its unilateral actions, tempting them to join a different bloc such as China’s Belt and Road Initiative. Because of that, Pakistan – the key player in the China-Pakistan Economic Corridor (CPEC) – would probably want to deepen this partnership to compensate for the losses incurred by closing its market in the United States and perhaps transform its geopolitical orientation as well.

The Path Forward: Challenges and Opportunities

For Pakistan, it is both a crisis and an opportunity for tariffs. The immediate issue, however, is economic cushioning—maybe a “Global Trade Branding Initiative” promoting exports to untapped markets in Africa or Southeast Asia, as some analysts have suggested. Within the country, measures to decrease production costs, develop decent infrastructures, and possibly impose minimum quality standards could enhance competitiveness. From a diplomatic point of view, Pakistan should ensure that it sails through this storm very pragmatically, stressing its economic needs against its strategic interests.

These tariffs are a measure of Trump’s enthusiasm for protectionism, and their success will depend on implementation. If they do not deliver sufficient manufacturing gains or provoke swift retaliation, the policy could backfire and damage US credibility and economic stability. As far as Pakistan-U.S. relations are concerned, tariffs can potentially test a partnership that has withstood the test of time throughout decades of stormy history. Navigating such a situation for Pakistan will require a full understanding of both its economic problems and the commitments that it has to other global trade organizations like the World Trade Organisation (WTO).

Historic Tariffs – A Defining Moment

Trump’s 29% tariff on Pakistan is not just an economic policy—it is a geopolitical statement. For Pak-US relations, it marks a crossroads that compels nations to redefine the terms under which they might be moving into a time of uncertainty. While Pakistan prepares for the aftershock and the US brass-knuckles its trade agenda, the coming months will tell if this money move would strengthen America’s hand or fracture a fragile alliance. One thing is clear: the echoes of “Liberation Day” will be heard far beyond the confines of the White House Rose Garden in shaping the future of Pak-US ties in ways that neither can fully predict.

---

If you want to submit your articles and/or research papers, please visit the Submissions page.

To stay updated with the latest jobs, CSS news, internships, scholarships, and current affairs articles, join our Community Forum!

The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.