Textile industry suggests way forward on Trump tariffs

ISLAMABAD: The textile industry has suggested the way forward to the government on Trump tariffs saying the US is not seeking tariff concessions rather it is targeting bilateral trade imbalances.

The United States has imposed a 29 percent reciprocal tariff on imports from Pakistan, driven by its $2.99 billion trade deficit with Pakistan. The tariff is based on a US deficit-to-import ratio, resulting in a 29 percent reciprocal duty on Pakistani exports.

Pakistan’s MFN tariffs are moderate— 10.3 percent on average, including 9.9 percent for nonagricultural goods — and do not constitute significant barriers to US exports. The $3 billion US trade deficit with Pakistan is relatively insignificant, accounting for just 0.25 percent of the total US. So, given the limited economic impact of Pakistan’s surplus and its modest tariff regime, there is credible room for negotiation, especially if US market access concerns are addressed constructively, says the paper prepared for the government by APTMA on ‘Trump Tariffs: Impact on Pakistan and Way Forward.”

Importantly, the US administration has explicitly signaled openness to negotiation. Trump has repeatedly indicated that countries may be able to secure exemptions or reductions if “concerns are addressed.

The United States is a critical market for Pakistan’s exports, particularly for textiles and apparel. In 2024, total exports to the US stood at $5.12 billion, of which $3.93 billion, or 76.7 percent, were textile and apparel. The apparel and made-up textile segments accounted for over 71 percent of Pakistan’s total exports to the US. The US is the second largest market for textile exports after the EU, accounting for about 25 percent to annual sectoral exports, making the sector highly concentrated and deeply exposed to any increase in tariffs. Pakistan imported $2.14 billion in goods from the US in 2024, of which cotton imports were $771.59 million (36.0 percent). Other key import categories included metals, machinery and electrical equipment, and chemicals.

Given the limited economic impact of Pakistan’s surplus and its modest tariff regime, there is credible room for negotiation, especially if US market access concerns are addressed constructively.

The APTMA also suggested option to increase US imports to balance the trade deficit saying that US cotton is already being imported on zero duty and Pakistan can substitute imports from Brazil and Afghanistan. To enable demand, FES (Export Financing Scheme) anomalies disadvantaging local yarn must be resolved. The government should allow direct imports of US LNG by the textile sector that is to reduce energy costs and will support US exports, without harming Pakistan’s trade position. Regulatory approval is required to this effect.

Beyond the challenge of tariffs, Pakistan’s is highly exposed to a demand slowdown in its key export markets. The US and EU account for $10–12 billion of Pakistan’s $18-20 billion in annual textile and apparel exports, making the sector particularly vulnerable. An additional 10 percent of exports—mainly intermediates like yarn and fabric—are shipped to countries like Bangladesh and Vietnam, which have themselves been impacted by tariffs and face similar demand-side pressures.