The United States’ imposition of a 39% tariff on Pakistani imports is expected to deal a heavy blow to Pakistan’s export revenues, with potential losses of up to $0.8 billion in 2024 alone. A policy note by the Lahore School of Economics warns that if this trend continues and exporters fail to absorb part of the cost, total losses over five years could rise to $4.22 billion. The final impact, however, will hinge on how much of the tariff is passed on to US consumers.
The report outlines several scenarios, indicating that if only 29% or 19% of the tariff is reflected in end prices, the damage could be scaled back to $0.6 billion or $0.4 billion in 2024, respectively. The textile sector, which makes up a bulk of Pakistan’s exports, is especially vulnerable—projected to lose $0.66 billion this year and up to $3.48 billion in five years under the full tariff burden.
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Interestingly, amid this challenging environment, there could be a silver lining. The US has imposed even steeper tariffs on other export-heavy nations like China, Vietnam, and Bangladesh, opening the door for potential trade diversion. LSE notes that international buyers might shift their orders to Pakistan in a bid to avoid higher costs, particularly in the textile industry, offering a possible cushion to the adverse effects.
Still, global economic uncertainty adds another layer of risk. A slowdown in global income growth, a likely consequence of prolonged trade disputes, could cut into demand for Pakistani goods. A mere 1% decline in foreign income growth could reduce Pakistan’s exports by over 1.4%, translating to a further loss of up to $0.49 billion over five years.
While negotiations and cost-sharing strategies may soften the short-term impact, long-term resilience will depend on how effectively Pakistan leverages this crisis. Strategic engagement with US buyers, competitive pricing, and enhancing export capabilities could determine whether the country emerges weakened—or better positioned—in a shifting global trade landscape.
