Retaliatory tariffs unviable for Pakistan: PBC

KARACHI: The Pakistan Business Council (PBC) said on Friday that retaliatory countermeasures in response to the new US tariffs are not feasible for Pakistan. The nation should instead focus on intensifying its efforts to maintain duty-free access to the EU under the GSP Plus programme.

On Wednesday, US President Donald Trump announced reciprocal tariffs on many countries, including 29 per cent on Pakistan. The US is Pakistan’s largest single-country export destination and one from which it derives the largest trade surplus. In 2024, the US imported $5.46 billion of goods from Pakistan. This represented 17 per cent of the country’s total exports. In the same year, Pakistan recorded a trade surplus with the US of $3.33 billion. In the January-February 2025 period, Pakistan exported $1 billion, at which rate, without the impact of higher tariffs, the projected exports to the US would amount to $6 billion.

The tariffs on Pakistan’s key competitors for textile products are higher -- China 54 per cent, Vietnam 46 per cent, Bangladesh 37 per cent and Indonesia 32 per cent -- while those on India are lower at 26 per cent, Turkey at 10 per cent, and Egypt and Jordan at 23 per cent.

“Counter tariffs is not an option for Pakistan. Neither is geopolitical leverage,” the PBC said in a note on Friday. “Reduction in demand due to higher tariffs is inevitable, and Pakistan would need to brace for the impact on exports,” it added.

According to the PBC, in the short term, it would notbe possible to change Pakistan’s export mix to avail of the reciprocal tariff differential with China, Vietnam, Bangladesh and Indonesia. At parity MFN tariffs, these countries were exporting more quantity, often at a higher unit price, implying a qualitative product differential which would take Pakistan time to address. Also, despite duty-free access under the EU’s GSP+ programme, Pakistan’s exports, including its textiles, pale against China and India, which pay full duty.

“Textile exporters should be examining how they can address the qualitative gap,” it said. “With exports to the US vulnerable to higher tariffs, Pakistan must redouble its efforts to maintain its duty-free access to the EU under the GSP+ programme. Pakistan’s exports to the EU far exceed those to the US,” it said.

“The government must address the gaps in compliance on human rights, labour rights, environmental protection, and good governance, and demonstrate compliance through monitoring and reporting. Exporters must not defocus on ESG or DEI, even if customers in the US are so inclined under the present regime.” The PBC noted that a positive impact on Pakistan’s exports is likely as US consumers of textiles downgrade to cheaper goods from Pakistan. The government must ensure that its policies, especially on energy and taxation, support exports. The ongoing review of the Export Facilitation Scheme must not disrupt the ability of exporters to import inputs duty and sales tax-free, whilst making it feasible for local industry to supply inputs to exporters free of GST, as was the case before the last budget.

“The objective of the US is to balance its trade relationships. Cotton, its main export to Pakistan, already attracts zero duty, whilst soya beans are presently levied duty at 3.0 per cent. Mechanical and aeronautical machinery is also levied duty at 3.0 per cent,” it said.

“However, additional customs duty (ACD) and regulatory duty (RD) apply on some of these imports, which, together with GST, raise the duty-paid value. The government must review ACD and RD to address US concerns.”