Trade war tremors

As US President Donald Trump escalates the trade war by imposing a staggering 145 per cent tariff on Chinese imports, the global economic landscape is undergoing seismic shifts. Amid this upheaval, Pakistan stands poised to transform potential adversity into strategic advantage.

The US administration's recent move has raised tariffs on a wide range of Chinese goods to an unprecedented 145 per cent, citing concerns over trade imbalances, national security, and global supply chain risks. China has now hit back with a 125 per cent retaliatory tariff on American imports, signaling the fiercest escalation in the ongoing trade war.

This tit-for-tat tariff duel has sent shockwaves through global markets. American stock indices have taken a hit -- Apple and other manufacturing giants face skyrocketing costs as their China-based supply chains get taxed into oblivion. Relocating production to the US is an expensive and time-consuming ordeal that’s rattling investors.

Pakistan has a strategic opportunity amidst these global realignments. While the US-China conflict deepens, Pakistan finds itself in a unique position. As Trump announced a 90-day pause on new tariffs for all countries -- except China -- Pakistan's stock market surged. The Pakistan Stock Exchange (PSX) saw a sharp rebound, fueled by a sigh of relief from exporters and investors who saw breathing space and an opening to capitalise.

Consider the following: Pakistan’s annual imports total $56 billion, resulting in a $30+ billion trade deficit. Yet, with the US, Pakistan enjoys a $3 billion trade surplus. In FY24, textile exports hit $16.7 billion, of which $14 billion were value-added. With a $25 billion installed capacity, $8 billion is still untapped.

In just the first eight months of FY25, Pakistan’s exports to the US reached $4 billion, expected to cross $6 billion by year-end.

This is not just a numbers game; it’s a moment of recalibration. Pakistan’s three-step playbook to capitalize is to: one, forge a tactical trade pact with the US. The US needs new sourcing allies. Pakistan should offer zero-duty access to selected American goods -- agri-tech, energy parts, medical devices -- in exchange for preferential treatment of Pakistani textiles, leather and surgical goods.

Two, fill the vacuum left by China in fashion and footwear. Chinese suppliers are becoming too expensive. American buyers are scouting new partners.

Pakistani manufacturers, particularly in Sialkot and Lahore, must rise to the occasion with speed, scale, and global quality compliance.

Three, invite Chinese industry to relocate through Pakistan. With 9.5 cents/kWh power, $100/month labour costs, and major ports like Karachi, Pakistan is a strategic sweet spot. Chinese firms can build here and export tariff-free to the West under a ‘Made in Pakistan’ label.

This is geoeconomic strategy. The US-China tariff standoff is redrawing the global supply chain map. Pakistan has 90 days to manoeuvre smartly.

We don’t need bailouts. We need buyers. We don’t need debt relief. We need deal-making.

With China penalised, America recalibrating, and global firms hunting for efficiency, Pakistan can be the supply chain solution they didn’t know they needed.

Let’s not miss this moment.

The writer is a consultant at various large companies, and teaches financial markets in Pakistan. He can be reached at: hissan3@gmail.com