Pakistan faces increasing risks to its export competitiveness due to the US’s escalating trade protectionism, according to a report from the Policy Research and Advisory Council (PRAC) and the Karachi Chamber of Commerce and Industry (KCCI).
The report emphasizes that the 29% tariff on Pakistani goods, introduced as part of a broader wave of US reciprocal tariffs, undermines Pakistan’s price competitiveness, particularly against regional competitors like India, Bangladesh, and Vietnam.
However, the report also points out that higher tariffs on Vietnam and Bangladesh could create new opportunities for Pakistan in key sectors like textiles, food products, and plastics.
Pakistan’s tariff rate of 29% is slightly higher than India’s 26% but significantly lower than Bangladesh’s 37% and Vietnam’s 46%. This shift in global trade dynamics, driven by US President Donald Trump’s protectionist measures, could severely impact Pakistan’s textile sector, which is heavily reliant on the US market.
Textiles account for 77% of Pakistan’s exports to the US, with a trade value of $4.18 billion, making it the most significant sector in Pakistan’s export portfolio.
While Pakistan enjoys a trade surplus of over $3.3 billion with the US, this reliance on textiles exposes the country to fluctuations in global demand and changes in trade policies that could threaten its competitive edge.
The PRAC and KCCI report urges the government to adopt a proactive approach that prioritises export diversification, enhances production efficiencies, and strengthens trade relations.
It stresses the importance of engaging with US trade officials to discuss potential tariff adjustments and reduce reliance on a narrow export base. Without strategic diversification, Pakistan’s export portfolio could face further challenges, the report warns.