The sudden tariff swings and chain reactions from US trading partners have left global markets reeling. The pace of developments has been too rapid and erratic for many weaker nations to fully grasp, let alone respond to systematically.
Pakistan, already grappling with complex economic, political and security challenges, is struggling to navigate the shifting global dynamics. However, sources in Islamabad confirmed that a high-powered delegation is already in Washington for bilateral engagement.
“Our strategy is to assure the US administration that we are exploring multiple avenues to address their concerns,” said a former trade diplomat of Pakistan. “On tariffs, we are open to reducing some on a ‘most favoured nation’ basis, provided the US reciprocates by rolling back additional duties. We also plan to share details of steps already taken to ease non-tariff barriers and facilitate US imports to Pakistan.”
It is also worth noting that Pakistan has recently pledged to the International Monetary Fund (IMF) to reduce trade-weighted average tariffs by 43 per cent to 6pc over the next five years. Amid a global tariff war, where many countries are moving in the opposite direction, it remains to be seen how this commitment plays out for Pakistan’s already narrow industrial base.
‘What little we call manufacturing is mostly assembly, dependent on key imported components, so if global trade dynamics shift, it affects us as much, if not more, than anyone else”
While downplaying the potential fallout of the tariff hike, the government did reveal its intention to send an official delegation to Washington, DC, to explore options but did not publicly share any bargaining leverage it plans to use amid the heightened economic diplomacy by competing nations.
President Trump’s imposition of a 10pc minimum tariff on all US imports, along with significantly higher tariff rates on most trading partners, including Pakistan, triggered a global market rout culminating in ‘Black Monday’ on April 7. Just two days later, on April 9 — the day new measures were to take effect — the US administration announced a three-month pause for additional tariffs, adding to the sense of unpredictability and further fuelling volatility.
These abrupt policy shifts, coupled with the growing US-China trade confrontation, have created new challenges for nations like Pakistan, which can ill afford friction with either of the two major powers.
The US administration’s decision to temporarily roll back additional tariffs was welcomed by Wall Street and the US financial sector. The US stock market posted its biggest single-day gain in 16 years since 2008, while treasury markets showed signs of tentative stabilisation. The reality, however, weighs heavy on markets that continue to vacillate. Some US analysts argued that it was the sharp erosion in bond markets, rather than the capital markets’ reaction, that compelled President Trump to swiftly backtrack on his trade stance.
“Even if the current US administration refrains from further surprises, the past two weeks have already given economists and diplomats enough to ponder for years,” commented an analyst anonymously. “The recent events shattered what little trust remained in the global order. Every nation now feels compelled to reassess its position and craft new economic strategies to shield itself from similar shocks in the future.”
‘The recent events have shattered what little trust remained in the global order, with every nation now feeling compelled to reassess its position and craft new economic strategies to shield itself from similar future shocks’
As expected, with their own stakes on the line, Pakistan’s private sector moved faster than the government in trying to understand the game-changing developments, their ripple effects on the country, and the implications for their own businesses.
“Pakistan may be a small player in the export market, but its dependence on imports is all-encompassing,” a business leader noted privately. “Beyond retail and wholesale, whatever little we have in the name of the manufacturing sector relies heavily on imports. What little we call manufacturing is mostly assembly, dependent on key imported components. So, if global trade dynamics shift, it affects us as much, if not more, than anyone else.”
When contacted, many senior government officials and members of the ruling coalition’s economic team were either evasive or had nothing to add beyond what is already publicly known. Some deflected questions, citing the matter as outside their purview and redirecting enquiries to others.
Speaking to the media after the announcement of a 29pc tariff on Pakistani exports to the US, Finance Minister Muhammad Aurangzeb, without detailing the potential impact, said the government was not “overly concerned”. He added that a high-level delegation would be sent to Washington to engage proactively as an “early mover” on the issue. Meanwhile, Prime Minister Shehbaz Sharif has formed a policy steering committee and a technical working group to formulate a formal response to the unilateral US action.
Businesses are quietly consulting experts and mobilising their collective platforms to assess the fallout and develop recommendations to support the government in navigating a crisis that could tip the world towards recession. Younus Dagha, former federal secretary and Chairman of the Policy Research and Advisory Council at the Karachi Chamber of Commerce and Industry, has compiled a comprehensive report.
The document systematically outlines the issue, covering trade volumes, exports to the US, potential sectoral impacts, and Pakistan’s comparative position against regional competitors, all backed with data. It also offers targeted, actionable recommendations.
In its conclusion, the report, titled ‘An analysis of US tariff barriers impacting Pakistan’s trade’, states: “To effectively navigate these shifts, Pakistan must adopt a proactive trade strategy that prioritises export diversification, enhances supply chain efficiency, and strengthens its trade diplomacy by reducing reliance on a narrow export basket, improving production efficiencies, and securing new markets. Pakistan can mitigate the impact of rising tariffs and safeguard its existing exports.”
Published in Dawn, The Business and Finance Weekly, April 14th, 2025
