Pakistan has secured a cut in US tariffs, lowering duties on its exports from 29% to 19%, in what officials describe as the first step toward deeper economic engagement with Washington. The move reverses part of the sweeping tariff hikes the US imposed in April this year on more than 60 trading partners under its “reciprocal tariffs” policy.
While the development has been welcomed in Islamabad and by exporters, analysts caution that tariff cuts alone cannot fix the structural hurdles undermining Pakistan’s trade competitiveness.
A Shift from April’s Heavy Tariffs
The April measures had placed Pakistan among countries facing some of the steepest duties, ranging between 10–50%. Grouped with other developing economies, Pakistan bore one of the highest slabs at 29%. The reduction announced this week is therefore seen as a meaningful, if partial, correction.
Official details remain thin. Neither the US Department of Commerce nor Pakistan’s commerce ministry has publicly released the full text of the arrangement. For now, most discussions appear to be happening under the umbrella of the Trade and Investment Framework Agreement (TIFA), first signed in 2003.
Concessions on Both Sides
According to media reports, Pakistan has granted duty-free access to over 4,000 US products while also opening the door to American investment in oil, minerals, and even emerging sectors like cryptocurrency. The first tangible outcome is already visible: a Pakistani refinery has confirmed an order of US crude oil.
Cnergyico Pk Ltd’s Vice Chairman, Usama Qureshi, said the company had evaluated West Texas Intermediate (WTI) crude and found it commercially viable. “If the economics prove right, we could scale up to a million barrels a month,” he added.
Government Optimism vs. Industry Skepticism
Haroon Akhtar, the Prime Minister’s advisor on industries, argued that Pakistan’s export potential—particularly in textiles—positions it well to take advantage of the new tariff rate. He stressed that private businesses were consulted at each stage, even if they were not part of the official delegation.
Not everyone agrees. Dr Khurram Tariq, a leading exporter from Faisalabad, criticized the absence of business representatives in direct negotiations. He described Pakistan’s one-percentage-point advantage over Bangladesh, Sri Lanka, and Vietnam as “notional” given the much higher domestic costs exporters face, especially in energy and financing.
On the other side, exporter Musadiq Zulqarnain defended the government’s approach, noting that trade talks go beyond textiles and involve multiple sectors. “Having too many private interests at the table could complicate matters,” he said.
Trade Snapshot
- In 2024, bilateral trade in goods and services between the two countries stood at $10.1 billion.
- Goods trade totaled $7.2 billion, with Pakistan enjoying a $3 billion surplus—mainly from textiles.
- Services trade was smaller at $2.9 billion, with the US maintaining a modest $610 million surplus.
The tariff reduction now gives Pakistani exporters a marginal edge: their products enter the US at 19% duties, compared with 20% for Bangladesh, Sri Lanka, and Vietnam, and as high as 50% for India.
The Bigger Picture
Experts, however, stress that tariff relief addresses only part of the equation. Pakistan continues to grapple with chronic competitiveness barriers—high energy prices, complex tax regimes, delayed refunds, and abrupt policy shifts. These factors, they argue, erode whatever advantage reduced tariffs might bring.
For Pakistan, the immediate win is clear: access to the US market at a slightly better rate than its rivals. The real question is whether domestic reforms will follow to ensure businesses can actually capitalize on that opening.
