Pakistan’s high-level delegation in Washington is negotiating what may be the country’s most consequential trade deal in years. At stake is the future of the 29% tariff imposed under the Trump administration on Pakistan’s exports to the US, a tariff currently suspended until July 9.
The economic implications are clear. Nearly 90% of Pakistan’s exports to the US are textiles. If the tariff snaps back into effect, it could force widespread factory closures and job losses amid a severe drop in foreign exchange earnings. Pakistan cannot afford this shock while already facing fiscal constraints and ongoing IMF programs.
However, this negotiation goes beyond tariffs. The US wants Pakistan to increase imports of American goods, especially agricultural commodities and crude oil, and to open sectors like mining to US investors. Pakistan’s offer to facilitate American investment in the Reko Diq copper-gold mine is a direct response to this pressure. The US sees critical minerals as a strategic asset in efforts to reduce dependence on China.
At present, Pakistan aims to keep the US market open while attracting foreign investment. But it also risks increasing economic dependence on the US for raw materials and energy, potentially limiting Islamabad’s policy flexibility in future trade or geopolitical disputes.
Another challenge is the asymmetry in negotiations. The US demands market access for its subsidised agricultural exports while maintaining significant protection for its industries. Allowing more US agricultural imports could undermine Pakistan’s domestic farmers and threaten food security. Any agreement must balance tariff relief with safeguards for local industries.
Despite these risks, Pakistan has little choice but to pursue a deal. The US remains its largest export market, with a $3 billion trade surplus in 2024. Preserving access to this market is critical.
From Washington’s perspective, the deal is about more than trade flows. It is part of a broader strategy to reduce China’s influence in South Asia by drawing Pakistan into closer economic cooperation. The US is leveraging trade negotiations to secure both economic and strategic interests.
The immediate priority may be tariff relief, yet over the longer term, economic sustainability will depend on diversifying exports, improving regulatory transparency, and creating a more competitive business environment. A trade deal with the US can provide breathing room, but it cannot substitute for deeper reforms.
