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Economists see hurdles and opportunities for Pakistan as US imposes 29pc tariff on country – Business

Analysts saw immediate hurdles and long-term opportunities for Pakistan after US President Donald Trump on Thursday imposed a 29 per cent tariff on goods the United States imports from Pakistan, along with higher duties on dozens of countries from rivals to allies and 10pc levies on most imports to his country, intensifying a global trade war.

The US imposed 29pc reciprocal tariffs on Pakistan, which charges the US 58pc, according to a board that Trump held during his announcement.

Sajid Amin, economist and deputy executive director (res) at Sustainable Development Policy Institute (SDPI), speaking to Dawn.com, noted that immediate impact will be negative, considering the US is the country’s largest trading partner.

“To offset that, Pakistan might have to subsidise local production to become more competitive,” he said. “Somewhere, you would have to cut down on local production costs” of the major exports to the US.

“The challenge will be whether the IMF will allow the country to subsidise,” he highlighted.

He added that the long-term impact, however, remaind uncertain.

“Firstly, you would have to successfully offset the immediate negative impact,” he said.

“Secondly, Pakistan’s tariffs are less than Bangladesh and Vietnam, which can be an opportunity but for that we’d need to be innovative,” he stated, adding that the medium and long-term impact would depend on how the country can offset immediate negative impact of the tariffs, and how Pakistan can innovate in industries when it has an advantage over other countries hit by tariffs.

On any Pakistan’s retaliatory measures, he stated; “Interestingly, we have imposed a 58pc tariff on the US.

“It’s already quite high — also if you look at Pakistan’s trade-to-GDP, as a trading partner the US might be a major export destination for the country, but for the US, Pakistan stands nowhere.”

He added that since Pakistan was a very small partner [of the US], the insignificance of the trade relations and volume remained very little for the US. “So, in that sense, the power — or the need — to retaliate is very insignificance, therefore, I don’t think Pakistan will do so,” he added.

On whether this can push Pakistan towards alternative, he said he did not see the tariffs having that big of an impact, since the US has always been one of the largest trade partners of the country.

“Perhaps the trade volume will be impacted, if we don’t offset the impact, but the trade patterns will remain the same,” he said.

Adil Nakhoda, economist and professor at the Institute of Business Administration Karachi (IBA), told Dawn.com that the country’s exports to US have been limited to textile, which could face the most significant challenges in the short-run.

He noted the US was the “most important single country destination market for Pakistani exports”, and that he did not see the reciprocals tariffs having an impact of the foreign relations as the US imposed tariffs on all trading partners, albeit at different levels.

On measures the country could take, he noted that, “Pakistan can consider increasing its exports of textile made-up products to the EU.

“It should strengthen trade relations with other countries regardless of its trading relationship with the US,” he added.

“My take on this is that the countries with larger trade surpluses with the US are being targeted based on the proportion of their trade surplus to total bilateral exports to the US,” he said.

“Pakistan will have to consider sourcing upstream textile products from the US in order to reduce this ratio as well as receive concessions on its exports (products with US content are likely to receive a certain level of tariff concessions).”

Ali Hasanain, associate professor of economics at Lums, said, noted that “America is one of Pakistan’s most important trade partners, and the one with which we run the largest trade surpluses”, adding that nearly a fifth of the country’s exports were destined for the US.

On whether this would impact US-Pakistan relations, he noted that relations with the US appeared to be stable but “in a low equilibrium at the moment”.

“The trade relationship is one component of our dealings with the US. Far more important in the short term is American support for Pakistan’s IMF programme,” he said. “and I — as a non-expert watcher of International Relations — expect the impact to be minimal.

He highlighted that since the tariffs impacted the US trade relations with all countries, there would a major shift in global trade patterns as a result — where countries will seek new options.

“However, the US is by a significant margin our biggest market, and may not be fully replaceable for Pakistani businesses,” he said.

On Pakistan’s pivot to other countries, he highlighted that there will be some attempts to shift to other markets by Pakistan and other major textile exports such as Bangladesh.

“Pakistan should continue to seek more diverse markets for our products, while at the same time working with other countries to join multilateral efforts to dissuade the US from staying on this course, which will shrink global trade overall and dampen economic activity moving forward,” he said.

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