ISLAMABAD: Pakistan stands at a strategic crossroads as sweeping US tariffs disrupt global trade flows and threaten to destabilise smaller economies caught in the crossfire, further heightening fears of a global recession.
While the immediate tariff impact may be manageable, the broader message is clear: the world order that enabled countries like Pakistan to put all their eggs in one basket with multilateral trade, bailouts, and preferential access is eroding.
Experts warn that Pakistan must change gears towards a self-reliant, diversified, and competitive economic strategy—or risk being left behind in a rapidly transforming global landscape.
According to a senior government official, Pakistan has already set the wheels in motion with a policy of diversifying economic, trade, and investment options.
He cited Prime Minister Muhammad Shehbaz Sharif’s recent successful visit to Belarus as the beginning of the country’s drive to cast its net wider for alternative markets and partners amid an intensifying world trade war.
“We need to do away with misconceptions of living under the US umbrella or falling into the lap of China to stand on our own feet,” he said, adding that massive changes in global trade could be a blessing in disguise for Pakistan.
President Trump’s sweeping Executive Order, issued on April 2, which he dubbed ‘Liberation Day’, imposed a blanket 10 per cent tariff globally, with steeper rates based on trade imbalances.
Pakistan has been hit with a 29 per cent tariff, placing its $5.5 billion export relationship with the US—primarily textile-based—on shaky ground.
Experts warn that Pakistan must change gears towards a self-reliant, diversified, and competitive economic strategy—or risk being left behind in a rapidly transforming global landscape.
Both the immediate and long-term effects of this tariff are undeniable. Pakistan’s textile industry, which makes up a significant portion of its exports to the US, is particularly vulnerable.
As textile exports contribute around 60 per cent of the country’s total export earnings, the new tariffs could reduce annual export income by as much as $1 billion, according to the Pakistan Business Council (PBC).
“Pakistan can’t afford a do-nothing approach,” warned Ehsan Malik, CEO of the PBC. “But neither should it overreact by offering to increase imports from the US at any cost, as that would impact the external account negatively.”
Malik’s cautionary message points to a broader issue: Pakistan’s over-reliance on a limited export base, especially in textiles, which leaves it walking a tightrope in an increasingly protectionist global economy.
The situation is compounded by Pakistan’s broader economic challenges. Despite a steady stream of international loans and investments, Pakistan’s economy remains largely dependent on imports, which outpace its export revenues.
For instance, the country’s trade deficit is estimated at around $24 billion, with its top imports including oil, machinery, and chemicals.
As a result, any shock to trade relations with a major partner like the US amplifies the pressure on Pakistan’s already strained external accounts.
Pakistan’s export strategy has been heavily centred on a few core sectors, primarily low-value textile goods, leather, and fibre products.
“Our overreliance on a few sectors has become a handicap,” said Sherry Rehman, President of the Jinnah Institute, an Islamabad-based think tank which focuses on public policy research, human rights, and regional peace and stability.
“Unlike diversified East Asian economies, Pakistan has not broadened its industrial base or export destinations,” she adds.
Experts argue that if the country is to keep its head above water in an increasingly multi-polar trade environment, the shift from textiles to value-added products is critical.
The tariffs are particularly striking because they hit countries with low trade imbalances the hardest.
“Several small economies with negligible contributions to the US trade deficit have been hit with the steepest tariffs,” economist Nazish Afraz noted.
In fact, Pakistan’s trade imbalance accounts for less than 0.3 per cent of the total US trade deficit.
Yet, Pakistan was subjected to a 29 per cent tariff, highlighting the political nature of these tariffs rather than a purely economic or trade-driven decision.
Our overreliance on a few sectors has become a handicap… Unlike diversified East Asian economies, Pakistan has not broadened its industrial base or export destinations.” – Sherry Rehman, President of the Jinnah Institute.
Nevertheless, these tariffs have put Pakistan’s policymakers between a rock and a hard place.
With few options for retaliation or leverage in negotiations from a position of strength, experts urge that the country must reconsider its long-term economic strategy.
“It is inevitable to make a transition from using geopolitics as a tool for economic gains,” said Haroon Sharif, chairman of the Pakistan Regional Economic Forum.
“There needs to be an economic value proposition based on competitiveness and diversification.”
The Trump tariffs are seen as part of a larger move to reshape the playing field of global trade.
These measures have already sent shockwaves through global markets—Wall Street lost $5 trillion following the announcement, while global supply chains are experiencing delays.
The oil market has also taken a hit, with a significant drop in prices.
“This is a sign that the US is dismantling the very global order it built,” said Khurram Husain, a financial journalist. “Pakistan has lived off this system for decades. That sun is now setting.”
While the immediate fallout may be a $1 billion loss in exports, the long-term implications for Pakistan’s economy could be even more severe.
Competitors such as China, Vietnam, and Bangladesh, despite facing higher tariffs, are better positioned to absorb these shocks.
“The general perception is that China will come out a winner due to its market diversification under the Belt and Road Initiative,” said Haroon Sharif.
Meanwhile, Pakistan’s lack of economic diversification and low levels of technological innovation put it at a distinct disadvantage.
Pakistan’s dependence on the US trade preferences and international aid has increasingly been called into question by both domestic and foreign stakeholders.
The country’s primary trading partners include China, the European Union, and the Middle East, yet its reliance on low-tech, low-value goods keeps it on the back foot during trade shocks.
In comparison, countries like China and Vietnam have spread their wiring by diversifying their trade relations and embracing technological advancements, making them more resilient to global economic changes.
Moving forward, Pakistan’s policymakers face a difficult choice—either continue its current path of limited diversification and reliance on US trade preferences or proactively shift towards an economic model that emphasises self-reliance and diversification.
This is a sign that the US is dismantling the very global order it built…Pakistan has lived off this system for decades. That sun is now setting.” – Khurram Husain.
Experts advocate for a major overhaul in Pakistan’s trade and economic strategies.
This should include enhancing domestic productivity, supporting value-added manufacturing, encouraging technological innovation, and pursuing new trade relationships outside traditional markets.
“By using imports as a strategic tool for both economic upgrading and trade re-balancing, Pakistan can address US concerns while pursuing its own development agenda,” said Nazish Afraz.
Key areas where Pakistan could focus include emerging industries such as Information and Communication Technologies (ICT), renewable energy, and agricultural technologies—sectors that hold the keys to both trade expansion and technological innovation.
The pivot towards a more resilient and diversified economy will require significant investments in infrastructure, skills development, and industrial policy. However, Pakistan’s leaders are running out of time.
As economist Dani Rodrik recently stated, “More than ever, the fate of developing countries now rests largely in their own hands.” For Pakistan, this may be the most pivotal moment of the 21st century.
Global Context and U.S. Impact
However, the effects of these tariffs extend far beyond Pakistan’s borders. The US itself may face significant repercussions, both in the short and long term.
Consumer prices in the US could rise as tariffs on imported goods drive up the cost of raw materials and finished products.
This is expected to lead to higher prices for everyday goods, including clothing, electronics, and furniture, many of which are imported from countries like Pakistan, China, and Vietnam.
Impact on Electronics and iPhones
One of the most immediate concerns for consumers in Pakistan and globally is the price of electronics, particularly iPhones, which are among the top-selling products in Pakistan’s high-tech market.
US tariffs on Chinese-made electronics, which include iPhones, could cause a price increase for these products in Pakistan.
While Apple has managed to secure some exemptions for critical goods, iPhones may still fall under new tariff regulations if not covered by special exemptions.
Experts suggest that the price of iPhones in Pakistan could rise by as much as 5–10 per cent, depending on whether Apple passes on the cost to consumers.
More than ever, the fate of developing countries now rests largely in their own hands… For Pakistan, this may be the most pivotal moment of the 21st century.” – Dani Rodrik. “
As Pakistan imports a large portion of its electronic goods, this price hike could further burden Pakistani consumers, many of whom already face high costs for tech products.
This could hurt demand for expensive items like iPhones, potentially limiting their market.
Complex Web of Tariffs Implementation and Delayed Assessments
Further complicating matters, the US importers are not required to pay these tariffs at the port of entry.
According to The Wall Street Journal, the new tariff policy allows companies to bring in goods and classify them afterwards, calculating the duty rates post-shipment.
This delayed assessment has created major uncertainty among importers, especially those in the electronics sector.
Importers are unsure whether the goods they have ordered will be hit with high duties, and customs brokers are facing classification backlogs.
The result is a bottleneck in the supply chain—shipment delays, warehousing confusion, and pricing instability.
For countries like Pakistan that re-export assembled or finished products or rely on imports of key components, this murkiness adds logistical stress and cost unpredictability.
In particular, the Pakistani retailers, dependent on US brands assembled in China, now face the risk of price volatility and stock shortages.
US job markets and consumer prices
Moreover, US job markets could be impacted. As companies face higher production costs due to tariff increases, they may be forced to reduce their workforce or relocate manufacturing to other countries, thus leading to potential job losses in industries reliant on cheap imports.
The US economy, long accustomed to inexpensive imports, may experience a reduction in purchasing power and a slowdown in consumption.
What is at Stake for China in the Trade War
While much focus has been placed on the immediate effects for countries like Pakistan, China also stands to lose significantly from the ongoing tariff war.
As the world’s largest exporter, China’s trade relations with the US are under significant pressure.
The tariffs imposed by the US on Chinese goods are not just a temporary setback but could alter the long-term structure of China’s trade practices.
The ongoing trade war challenges China’s efforts to diversify its markets and expand its influence through initiatives like the Belt and Road.
Countries seeking to diversify their supply chains may start moving away from China, a move that would weaken Beijing’s influence in global markets.
Additionally, with fewer markets open to Chinese exports, China’s manufacturing sector could face a slowdown, which would affect its growth and stability.
Despite these losses, China is taking strategic steps to mitigate the impact. By strengthening ties with other countries in the East and actively seeking new markets, China hopes to soften the blow of the tariff war.
However, the uncertainty surrounding the tariffs remains a significant risk to China’s global economic position.
