Here’s the reality: 19% is not low. It is still a heavy burden for our struggling exports, which remain heavily dependent on favours from our largest export market. But 19% looks slightly better than the rates imposed on neighbouring countries like India, Bangladesh and Vietnam. And given our tendency to measure ourselves through others’ lenses, we celebrate, even if the difference is just 1% in the case of Bangladesh.
Now let’s put this into perspective with some numbers. In 2024, India’s exports to the US were $77.5 billion and Bangladesh was $10.7 billion. Pakistan’s exports to the US stood at only $5.1 billion. Commentators within India are worried that India may lose a significant share in the US market, leading to widespread job losses.
Assuming demand remains at the similar level, it means that even by capturing a small share from Indian exports, Pakistan can gain significantly in terms of export volume. Given recent developments in the US-India political relationships, this opens up avenues for Pakistani businesses to aggressively capitalise on.
Bangladesh dominates the textile sector — our mainstay — standing as the world’s second-largest exporter after China. Its readymade garments alone brought in $46 billion in 2024, surpassing Pakistan’s total exports for the same year. We do not believe that Pakistan will be in a position to take any share from this pie.
While these possibilities exist, it is premature to celebrate a marginally lower tariff without fixing what’s broken at home.
Consider our industrial constraints. Power tariffs for Pakistan’s industries range between 12 and 16 cents per kilowatt hour (kWh), while India and Bangladesh enjoy rates closer to 6.7 cents per kWh. Add to this our chronic issues such as low labour productivity, high tax rates, and rising business costs, and you see why Pakistan struggles to produce competitively priced exports.
Then comes another concern – overreliance. Nearly 80% of Pakistan’s exports to the US are textiles. Such dependence on a single category is risky. If American buyers find cheaper alternatives, or if we fail to deliver quickly and at high quality, they will switch, regardless of the tariff differential. Simply put, tariffs matter, but so do speed, efficiency, and product diversity.
Pakistan’s problem is not what tariff the US imposes, but what it produces and how it produces. Our export basket is narrow, our productivity is low, and our costs are high. Even if tariffs were slashed tomorrow, we would still fail to compete unless we address these fundamentals.
The pathway for Pakistan should be clear at this moment. Firstly, Pakistan must compete with competitors not by undercutting prices but by premium differentiation. US buyers are increasingly demanding ISO-certified factories, labour transparency, and environmental compliance. Thus, Pakistan needs to invest in technical textiles, adopt sustainable practices, and address the problems in the adoption of Industry 4.0.
Positioning ourselves as a premium, compliant, and environmentally responsible supplier is the only way to gain long-term credibility in this sector. The speedy production and delivery to meet demand also matters, because Pakistan’s tariff advantage could vanish within months if it doesn’t match the pace of other countries.
Second, we must diversify beyond textiles. Pharmaceuticals, IT-based goods and services, processed foods, and electronics offer immediate opportunities. Third, Pakistan also needs to find alternative markets as export destinations, because while we have managed to develop a healthy relationship with the present US leadership, history suggests that the relationship has been marked by ebbs and flows.
We should actively pursue US investment in Pakistan and encourage business-to-business collaboration. Recent example of Chinese investment in Pakistan’s textile sector is a good sign. Such investment brings not only capital but also technology and managerial knowledge, which helps in improving our productivity.
The role of overseas Pakistanis in the US can be very helpful in this context. They can become a bridge between US investors and investment opportunities in Pakistan. Leveraging their social capital, they can convince US companies to consider Pakistan as a destination of their investment.
To win this trade war, we need to reassess our position on both external and internal fronts. Lower tariffs mean little, if we cannot supply the market with competitive and diverse goods. Our survival will depend on whether we continue chasing small victories in textiles or finally build a strategy that makes Pakistan a credible, premium, and diversified player in the global market.
International trade is not a one-way street; it is a highway, where traffic flows in both directions.
The writers are affiliated with the Policy Research Institute of Market Economy (PRIME)