Pak Elektron poised to win big in U.S.-China tariff war

Pak Elektron Ltd. (PAEL) appears to be one of the major beneficiaries of the U.S.-China tariff war. With higher duty imposed on Chinese-made transformers, the Pakistani company has a significant opportunity to expand its exports.

Despite a 29% tariff imposed on Pakistani goods entering the U.S. (currently paused for 90 days), the higher 145% tariff on Chinese goods may create additional demand for PAEL's transformers. The company began exporting transformers to the U.S. in March 2025.

Sherman Securities noted that the U.S. imports $5 billion worth of transformers from China. China is the largest global supplier of power transformers, with annual exports valued at approximately $45-50 billion. The U.S. is the leading importer of Chinese transformers, accounting for $4.5-5 billion annually.

The recent 145% tariff on Chinese transformers will make them significantly more expensive, potentially creating opportunities for new players in the U.S. market.

Notably, PAEL has already initiated power transformer exports to the U.S., valued at approximately $3 million as of March 2025. According to company officials, PAEL has raised its export target to $50 million by the end of calendar year 2025, driven by rising demand.

Sherman Securities estimates that PAEL could capture a market size of $150-200 million in the U.S., based on its current production capacity.

The company has an annual production capacity of 8,000 transformers but manufactured only 2,488 units in 2024, reflecting a capacity utilization rate of 31%. For every 10% increase in capacity utilization, PAEL's annualized earnings may rise by Rs0.6 per share.

In comparison, Pakistan is a relatively smaller transformer market, estimated at $300 million annually. However, China may revise its export policies and offer lower prices, potentially impacting the Pakistani transformer market.

That said, given the smaller size of the Pakistani market, the likelihood of price dumping appears low. Additionally, Chinese transformers are subject to a 35% anti-dumping duty in Pakistan.