THE new agreement between Pakistan and the US, heralded as a ‘strategic’ breakthrough in their trade and investment ties, has sparked hopes of a potential boost in our exports to America — our single largest market. However, the sketchy details of the deal suggest that the reduction in the punishing US reciprocal tariffs on Pakistani goods — from the previous 29pc to 19pc — levels the ground but does not give the country an edge over its competitors in the US market. That we have dodged a steeper tariff is a relief. But it will not push Pakistan into the American market ahead of its regional rivals. In fact, our key regional rivals — barring India — have received a better deal than us. For example, countries such as Vietnam and Bangladesh were initially slapped with higher ad valorem duties of 46pc and 37pc respectively. That gave Pakistan a clear advantage. But the subsequent reduction in duties on these nations to 20pc has eroded that advantage. At best, Pakistan now retains parity with most of its competitors. We have lost the opportunity to secure the preferential, greater market access needed for a decisive export surge to the US.

Unless the details of the deal are made public, an element of uncertainty regarding the consequences of inconclusiveness of the pact will persist. In his executive order, President Donald Trump has tied his revised global tariffs to broader security and economic cooperation with its trading partners. The failure of talks will automatically invite 10pc ad valorem duties on any faltering trading partner of the US. Pakistan, as per the executive order, falls into the category of countries that have either finalised an agreement, or are close to agreeing on meaningful commitments, with the US. Unless we have concluded the pact and signed it, the threat of additional punitive import taxes will continue to loom large over our goods. Further, if India, despite its current higher tariffs, manages to strike a more favourable deal in the weeks ahead, Pakistan’s perceived gains over its arch rival could quickly evaporate. The new trade deal with Washington may give some breathing space, but it is also a reminder that Pakistan needs to urgently address issues such as exorbitantly high energy costs, steep taxes, policy inconsistency, etc, which are affecting the international competitiveness of its goods, besides working on economic diplomacy to obtain greater market access from Washington.

Published in Dawn, August 3rd, 2025