Trump’s tariffs: Pakistan’s textile sector faces short-term challenges

The United States has imposed a 29% reciprocal tariff on Pakistani exports, dealing a blow to the country’s critical textile sector, which accounts for over 75% of its shipments to the U.S. market.

The Institute of Cost and Management Accountants of Pakistan (ICMAP) warned in a report that the tariff could trigger short-term job losses, factory closures and reduced competitiveness for Pakistani textiles in the U.S., its largest export destination.

However, the analysis noted that rivals like China (34%), Bangladesh (37%), and Vietnam (46%) face even steeper tariffs, potentially opening long-term opportunities if Pakistan pivots strategically.

The move, part of President Donald Trump’s sweeping April 2 executive order targeting over 180 countries, aims to counter what the U.S. calls "unfair trade practices," including currency manipulation and weak labor standards.

"India (26%) and Turkey (10%) are now our key competitors in the U.S. market due to their lower tariffs," said Muhammad Yasin, Vice President of ICMA. "This demands immediate government incentives and a shift toward high-value products."

The 90-day pause presents Pakistan with a unique opportunity to reshape its policies, leveraging recent rulings and engaging diplomatic channels and the Ministry of Finance to devise strategies aimed at boosting exports.

How the U.S. calculated the tariffs

The U.S. formula divides a country’s tariff rate on American goods by two to set the reciprocal rate. For Pakistan:

- U.S. exports to Pakistan (2024): $2.14 billion

- U.S. imports from Pakistan: $5.12 billion

- Implied Pakistani tariff on U.S. goods: 58.3%

- Reciprocal U.S. tariff: 29% (58.3% ÷ 2)

Global fallout

The tariffs have escalated into a trade war, with China retaliating with 84% duties on U.S. goods, prompting Washington to raise rates to 125%. Meanwhile, 20 governments, including Pakistan’s, are seeking negotiations.

"Pakistan must diversify beyond the U.S. and EU," the ICMA report urged, recommending pushes into African, Central Asian and Southeast Asian markets. It also called for tax relief, duty-free raw material imports and diplomatic outreach to lower U.S. tariffs.

By the numbers

- Pakistan’s 2024 trade surplus with U.S.: $3.57 billion ($5.44B exports vs. $1.88B imports)

- Top Pakistani textile exports to U.S.: Knitwear ($1.8B), woven garments ($1.5B), home textiles ($1.2B)

- Countries hit hardest: Lesotho (50%), Laos (48%), Vietnam (46%)

Pakistan’s Finance Minister Muhammad Aurangzeb announced a high-level delegation would visit Washington for talks. Analysts say the crisis could accelerate overdue reforms.

"The era of rules-based free trade is over," Singapore’s Prime Minister Lawrence Wong declared — a warning echoing across global markets.