From shock to strategy: How Pakistan should respond to US 29% tariff hike

The recent 29% tariff imposed by the United States on Pakistani imports has sparked widespread concern among economists, exporters, and policymakers in Pakistan. The move, presented by the U.S. as part of a new “reciprocal” trade policy, aims to balance what it sees as unequal trade relationships. In simple terms, the U.S. is saying that if a country charges high tariffs on American products, it will respond with a tariff of its own, mirroring that rate. For Pakistan, this has resulted in a steep increase that could have far-reaching consequences for its already fragile economy.

Pakistan has long depended on exports to power its economy, and the United States is one of its top trading partners. In particular, the textile and garment sector — which dominates Pakistan’s export profile — stands to suffer the most. American buyers now have to pay nearly a third more to bring in Pakistani goods. For many retailers and distributors in the U.S., this additional cost is a deal-breaker. It makes Pakistani textiles less competitive compared to products from other countries that either face lower tariffs or benefit from trade deals like duty-free access.

This sudden shift could lead to a drop in export orders, especially for small and mid-sized textile manufacturers who don’t have the capacity to absorb such a price hike or negotiate better terms with buyers. If orders begin to slow down, the effect will trickle down fast — from factory floors to cotton farmers, logistics workers, and beyond. Considering how many people are directly or indirectly employed in the textile sector, this isn’t just an issue of lost revenue — it could mean thousands of lost jobs.

Other industries aren’t immune either. Sectors like leather goods, surgical equipment, rice, and even construction materials exported to the U.S. are now facing the same elevated tariffs. Pakistan has made a name for itself in producing high-quality surgical tools, for example, but the price hike could cause U.S. buyers to look to other suppliers, even if they have slightly inferior quality. That potential shift in buyer behaviour puts pressure on Pakistani exporters across the board.

All of this couldn’t be happening at a worse time for Pakistan. The economy is already dealing with relatively high inflation and sluggish growth. The increased cost of imported goods¬ ¬– which are paid for in dollars¬ – has pushed prices higher at home, squeezing household budgets. If exports now begin to shrink due to lost competitiveness in the U.S. market, it’s going to be harder for Pakistan to earn the foreign currency it needs to stabilize the rupee and pay for essential imports like fuel and machinery.

In response, the Pakistani government is reportedly exploring its options. There’s talk of engaging with U.S. officials to seek a reduction in tariffs or negotiate a new trade framework. Some voices within the industry have suggested Pakistan could lower some of its own tariffs on key American goods, such as cotton or soy products, to build goodwill and open the door to talks. Others argue that Pakistan needs to urgently diversify its export markets to avoid being too dependent on a single country like the U.S., whose trade policy can shift with little warning.

There’s also a broader concern that goes beyond just the numbers. Trade isn’t only about economic value — it’s also about perception. If buyers in the U.S. begin to see Pakistan as an unstable or unpredictable trading partner due to pricing issues, it could take years to rebuild that trust. Even if the tariff is lifted in the future, the damage to relationships between buyers and sellers might linger. Yet amid all the worry, some see a narrow opportunity. Since the U.S. has applied even higher tariffs to countries like China and Bangladesh, it’s possible that Pakistan could still remain a viable option for certain U.S. importers — especially if it moves quickly to offer competitive pricing, ensure faster delivery times, or improve quality. But those gains, if they come at all, would likely be limited and short-term.

In the long run, Pakistan will need to make some difficult decisions. It must rethink its trade strategy, invest in increasing industrial efficiency, and focus on expanding into new markets. That might mean improving trade ties within the region, negotiating better terms with the European Union, or deepening relationships with Middle Eastern and Southeast Asian economies. Trade diversification, better branding, and more robust policy support for exporters will be essential if Pakistan wants to avoid being caught off guard the next time a major partner makes a policy shift.

The U.S. tariff decision isn’t just about taxes on goods — it’s a signal of how global trade is evolving. It’s more nationalistic, more competitive, and increasingly volatile. For Pakistan, adapting to that new reality is not optional. It’s necessary for economic survival.

(The writer is an economic analyst and development practitioner with over 17 years of international experience).