President Donald Trump's latest trade adjustments have resulted in a 29% tariff being placed on Pakistani exports to the United States, which are valued at approximately $6 billion. This significant increase from the previous preferential rates under the Generalized System of Preferences (GSP) is set to raise the cost of Pakistani goods for American consumers.

This tariff imposition creates both challenges and potential opportunities for Pakistan in comparison to its Asian trade partners. While countries like Vietnam (46%), Indonesia (32%), Cambodia (49%), China (54%), and Bangladesh (37%) face higher tariffs, Pakistan will be at a disadvantage compared to India (26%), Turkey (10%), and certain Central American and Middle Eastern nations (23%). The ultimate outcome will depend on the results of individual country negotiations, but a decrease in Pakistani sales to the US market is anticipated.

The textile and apparel industry, a major contributor to Pakistan's exports to the US, is expected to be severely impacted. In 2023, Pakistan exported $5.01 billion worth of goods to the US, with textiles forming the bulk of those exports. Key categories include miscellaneous textiles ($3.87 billion), knit or crochet clothing ($785.8 million), leather clothing and accessories ($591.8 million), and cotton-related products ($1.03 billion). The 29% tariff increase may make these products less competitive against lower-cost alternatives.

However, the higher tariffs faced by competitors such as Vietnam, Bangladesh, and Sri Lanka could provide Pakistan with a competitive advantage if those countries struggle to meet demand. Conversely, Turkey and some Far Eastern nations may be able to fill the market gap.

Critics have questioned the methodology used to calculate these tariffs, arguing that they are based on an arbitrary formula that divides the US trade deficit with a country by its total exports to the US, rather than actual trade policies. This approach has led to disputed figures. President Trump has defended the tariffs, stating that they are approximately half of the tariffs that the US faces from Pakistan.

The methodology also disregards the US's substantial surplus in services trade, further weakening the justification for these tariffs. As US import costs rise, consumers may seek alternative sources or domestic products. However, for essential goods with limited substitutes, American buyers are likely to face increased prices. Pakistan's textile industry, already dealing with economic instability and energy costs, now faces an additional challenge in maintaining its US market share.

While the tariffs present challenges, they also open up potential opportunities. Pakistan may consider diversifying its supply routes towards countries like China and Iran to mitigate the impact. The full effects of these tariffs will become clearer in the lead-up to the 2025-26 federal budget.