The recent imposition of a 29% tariff by the United States on Pakistan’s exports is expected to significantly impact the country’s already struggling textile sector and exacerbate existing economic challenges. The tariff, part of a broader move by the US to boost domestic manufacturing, comes at a time when Pakistan was already grappling with stagnation in its key export industries.
As per news reports, this tariff hike is the latest blow to Pakistan’s export sector, especially its textile industry, which accounts for around 75-80% of the country’s exports to the US.
While the new tariff on textiles is lower than those applied to competitors like Vietnam (46%), Sri Lanka (44%), and Bangladesh (37%), it puts Pakistani goods at a disadvantage against India, which benefits from a lower tariff rate of 26%. This further complicates Pakistan’s position, especially since the country exports similar textile products to the US as India under product codes 61, 62, 63, and 52.
The 29% tariff is expected to disrupt trade patterns, potentially driving Pakistani exporters to face heightened competition from China, Vietnam, Bangladesh, and India, which are also major suppliers of textiles to the US. As these countries redirect their focus to other markets like Europe, competition for Pakistan’s textile exports will intensify in those regions, adding further pressure on the country’s exports.
In FY24, Pakistan’s textile exports to the US totaled $5 billion, representing nearly 92% of the country’s total exports to that market. However, the overall export trend has declined, with a slight dip in the first eight months of FY25 despite textiles still accounting for a significant portion of total exports. This growing tariff burden on textile products is anticipated to dent further the sector’s ability to maintain its competitive edge in the international market.
Several prominent Pakistani textile companies, including Interloop Limited, Kohinoor Textile, Nishat Mills, and Gul Ahmed (GATM), are directly impacted by this tariff hike. Even companies like Pak Elektron, which recently began exporting transformers to the US, will feel the pinch.
Despite the challenges, Pakistan’s trade balance with the US remained in surplus, with exports totaling $5.44 billion in FY24, compared to imports of $1.88 billion. However, this surplus is under threat as Pakistan’s exports face increasing hurdles, especially in the wake of the US tariffs. As of FY25, the surplus has narrowed, standing at $2.51 billion, with exports at $4.01 billion and imports at $1.50 billion.
The textile sector’s difficulties are compounded by higher operational costs within Pakistan, which are less competitive compared to regional rivals. Despite government efforts to reduce power tariffs to ease business costs, industry leaders argue that more relief is needed to maintain Pakistan’s position in global markets.