Trump's
trade tariffs and their impact on Pakistan's economy
The impact
of international economic policies is not limited to the countries directly
targeted by them, but has an invisible but profound impact on economies around
the world.
Among the
trade policies adopted by the United States during Donald Trump’s presidency,
the most prominent was the “America First” policy and the implementation of
trade tariffs. The main purpose of these tariffs was to discourage Chinese
products and protect American domestic industry, but this policy affected the
global trade balance and its scope extended to developing countries like
Pakistan.
The Trump
administration imposed tariffs worth billions of dollars on major trading
partners such as China, the European Union, Mexico, and Canada. Although
Pakistan was not a direct target of these sanctions, the resulting global
imbalance affected Pakistan’s economy from many angles.
Pakistan’s
economy depends largely on exports, including textiles, surgical instruments,
leather, and sporting goods. When US tariffs restricted major exporters like
China, the US began looking for alternative markets, which could have provided
Pakistan with an opportunity. However, Pakistani industry could not fully
exploit these opportunities. The main reasons include substandard production,
lack of branding, and lack of global certifications required for exports.
Energy crisis and high costs have also left Pakistani exporters behind in the
global race.
Trump’s
tariffs not only affected trade in finished products but also created
fluctuations in the global prices of raw materials, especially chemicals,
metals, and industrial machinery. Since Pakistan relies on imported raw
materials for many items, these price increases have increased production
costs. According to the Pakistan Bureau of Statistics, the import cost of
industrial raw materials increased by 17% in 2023, which directly affected
local industries.
The economic
slowdown in China and other affected countries as a result of US tariff
policies has changed the trend of global investment. When inflation increased
in the US, the Federal Reserve raised interest rates, which led to capital
moving to the US from all over the world. Capital began to flow out of emerging
economies like Pakistan, and the value of the rupee came under pressure. This
not only increased inflation but also increased the cost of imported goods.
The
disruption caused in the global market by Trump’s trade war severely affected
small and medium-sized enterprises (SMEs) in Pakistan. On the one hand, export
prices lagged behind global competition, on the other hand, profits decreased
due to the high cost of raw materials. In such a situation, many industries
either closed down or were forced to operate on a limited scale.
It would not
be wrong to say that opportunities also lurk in the face of crisis. After the
Trump tariffs, the US and other Western countries were looking for alternative
suppliers. If Pakistan had taken advantage of this opportunity, it could have
made its mark in the textile and engineering sectors. But for this, it was
necessary for the government and the private sector to work together to improve
the quality, branding, and certification systems of exports. Expanding the
implementation of trade agreements like GSP+ is also essential.
To move
forward, Pakistan needs to make trade diplomacy more effective, target regional
markets like Africa, Central Asia, and the Middle East, and equip local
industry with modern technology. Along with this, fiscal policies should be
such that they are supportive, not a hindrance, for exporters.
Trump’s
trade tariffs were seemingly only part of the economic war of the major global
powers, but their echoes were also heard in developing countries like Pakistan.
Pakistan needs to align its long-term trade and industrial policies with modern
requirements to protect itself from the effects of such global policies.
Otherwise, every global shock will continue to hurt our fragile economy.
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