The recent 29 per cent tariff imposed by the US on certain products from Pakistan, especially in the textile and leather sectors, could have a negative impact on Pakistan's economy.
TRADE TROUBLES
The recent 29 per cent tariff imposed by the US on certain products from Pakistan, especially in the textile and leather sectors, could have a negative impact on Pakistan's economy.
In 2022, Pakistan’s textile exports totaled around $15 billion, with the US accounting for 20-25 per cent of that, which means Pakistan exported around $3 billion to $3.75 billion worth of textiles to the US annually. Similarly, Pakistan’s leather exports were valued at around $1.5 billion, and the US was the destination for around 25-30 per cent of those exports, amounting to $375 million to $450 million per annum.
The recent tariff is expected to increase the cost of Pakistani goods, making them less competitive in the US market, which could lead to a reduction in demand. If demand for these products drops by 10-15 per cent, Pakistan could lose between $366.25 million and $549.375 million annually. For the textile sector alone, the loss would be between $325 million and $487.5 million, and for the leather sector, it would range from $41.25 million to $61.875 million annually.
This translates to a monthly loss of approximately $30.52 million to $45.78 million for the country. The loss in export revenue from these sectors could worsen Pakistan’s economic challenges, leading to job cuts, production slowdowns and negative effects on industries linked to exports, such as packaging, transport and logistics.
This new tariff is making things even harder for the Pakistani exporters, who now fear losing business in one of their key markets. It is also putting more pressure on government officials, who are trying to find ways to stabilise the economy and support local industries.
The proposed increase in tariffs is affecting many textile and leather products -- two of Pakistan’s biggest export industries. These industries are extremely important for the country. They provide jobs for millions of people and bring in a lot of money from other countries, especially through exports.
The US is one of the top countries that buys these products from Pakistan. So, if higher tariffs make it harder or more expensive for the Pakistani products to enter the US market, it could cause serious problems. This might mean fewer orders, factory slowdowns, or even job losses. In the long run, it could hurt Pakistan’s economy by reducing foreign income and increasing financial pressure on workers and businesses in these key industries.
Business leaders are urging the authorities to engage with their US counterparts and request a review or reconsideration of the tariff hike. They are also calling for relief measures at home
Exporters fear that the additional duties will make Pakistani goods more expensive and less competitive in the US market, as they might shift to suppliers from other countries such as Bangladesh, Vietnam or India, who either enjoy lower tariffs or benefit from trade agreements with the US. This could result in a decline in orders, production slowdowns, and potential job losses, especially in the industrial hubs of Faisalabad, Sialkot and Karachi.
Small and medium-sized enterprises, which often lack the financial cushion to absorb such shocks, are likely to be hit the hardest. Many of these businesses operate on thin margins and depend heavily on exports for survival. A reduction in revenue could lead to layoffs, further unemployment and lower income for thousands of families. The ripple effects would also be felt in supporting industries such as packaging, transport, and logistics.
The imposition of tariffs also highlights the need for Pakistan to diversify its export base and look for the new markets. Over-reliance on a few countries makes the economy vulnerable to sudden policy changes. It also underscores the immediate need to improve the quality and branding of the local products, negotiating better trade deals, and enhancing productivity to remain competitive in the global market.
On a macroeconomic level, lower export earnings would worsen the balance of payments situation. Pakistan is already struggling to maintain foreign exchange reserves and meet its international debt obligations. A decline in dollar inflows would put further pressure on the Pakistani rupee, possibly leading to further depreciation and imported inflation. This would make everyday items more expensive for ordinary citizens and add to the cost of living.
The government has expressed concern over the US decision and is reportedly considering diplomatic and trade-level talks to resolve the issue. Business leaders are urging the authorities to engage with their US counterparts and request a review or reconsideration of the tariff hike. At the same time, they are also calling for relief measures at home, such as tax breaks, subsidies, or special export incentives to help the affected industries cope with the added costs.
This US decision comes at a time when Pakistan is confronting serious economic challenges. Unless mitigated through timely diplomatic efforts and robust domestic policies, this move could slow down export growth, reduce employment, and deepen the economic crisis already facing the country.
The writer is a seasoned journalist and a communications professional. He can be reached at: tariqkik@gmail.com
