KARACHI: Can Pakistan benefit from a lower US tariff rate than other countries in the region? Businesspersons argue that high costs of doing business are a major hurdle to doing so.
According to the latest trade data from the Pakistan Bureau of Statistics, the country’s trade deficit widened by more than 30 per cent year-on-year to $2.87 billion in August. Imports surged by 6.4 per cent to $5.29 billion while exports fell by 12.5 per cent to $2.42 billion. Shipments to the US also declined by 13 per cent year-on-year in August, Trade Development Authority of Pakistan data shows.
After US President Donald Trump issued an executive order doubling tariffs on India to 50 per cent on August 6, while keeping tariffs on Pakistan at 19 per cent and Bangladesh at 20 per cent, some analysts and officials claimed that this presented an opening for Pakistan. However, business persons are now raising concerns about Pakistan’s ability to capitalise.
In his comments to The News, Karachi Chamber of Commerce and Industry (KCCI) President Javed Balwani said “electricity, gas, labour and interest rates in Pakistan are too high” and that there was as yet “no benefit” from the relatively lower US tariffs on Pakistan.
As per the ‘Electricity 2025 — Analysis & Forecast to 2027’ report by the Paris-based International Energy Agency (IEA), power tariffs for energy-intensive industries in Pakistan averaged 13.5 cents per kilowatt-hour (kWh) in 2024, more than double industrial electricity prices in India of 6.3 cents per kWh.
Pakistan’s policy rate of 11.0 per cent is also higher than both India (5.5 per cent) and Bangladesh (10.0 per cent).
Bilwani also said that “for exports of the same quantity and quality”, the profit margin of a business in Bangladesh could be up to “20 per cent” while a Pakistani business would make as little as “4.0 per cent” profit. “So, if a buyer in the US asks for lower prices due to tariffs, the business in Bangladesh can better absorb the hit”, claims Bilwani.
Tax policy was raised as another possible area of concern, with former FPCCI president Mian Nasser Hyatt Maggo calling it the “biggest problem” for exporters. Maggo claimed that there has been “no special benefit” from Pakistan’s relatively lower tariff rate as yet but that “there could be in the long term”, which would require “investment in capacity”.
The potential for long-term benefit due to the higher tariffs on India was also highlighted by Shankar Talreja, director research at brokerage firm Topline Securities: “Overall, I believe Pakistan’s position will remain as it is, while if higher tariffs on India will continue, this should be positive for Pakistan”.
However, Talreja also mentioned that a one per cent tariff advantage over Bangladesh “is not that high given our energy cost is high vs peers, though we have the benefit of cheap labour”.
The US remains the top export destination for Pakistan, with total exports during FY2024-25 recorded at $6.03 billion as per the SBP.