It is that time of the year when everyone in Pakistan will somehow want to believe that the US elections will benefit Pakistan. This perception rests on assumptions that Republican candidate Donald Trump would support leaders like Imran Khan or avoid involvement in Middle Eastern conflicts, thereby reducing regional instability.
However, these expectations overlook the reality of Trump’s policies and their potential impact on the global economy. A second Trump presidency could, in fact, worsen inflationary pressures worldwide, which would adversely impact Pakistan’s already import-dependent economy.
Furthermore, any perceived benefit in the Middle East could backfire, with significant repercussions for Pakistan.
One popular notion is that Trump’s return would help the incarcerated Imran. This view is based on Trump’s perceived support for populist leaders worldwide and his reputation for defying political norms.
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However, US foreign policy is ultimately driven by its own interests, not individual inclination. Whether led by Trump or anyone else, the US is unlikely to intervene in Pakistan’s internal affairs to support any particular political leader, especially amid heightened US economic concerns and its focus on addressing global inflation.
Many also believe that Trump’s “America First” stance would mean a withdrawal from the Middle East, resulting in reduced tensions across the region.
However, Trump’s previous term saw increased US economic sanctions and diplomatic pressures on Middle Eastern countries. For example, his withdrawal from the Iran nuclear deal heightened tensions with the country, affecting regional stability and oil prices.
In an interview with TRT World, journalist Mehdi Hasan noted that Trump’s approach to the Middle East was more aggressive than often perceived, and his return could increase the likelihood of economic and even military conflicts.
For instance, under Trump’s tenure, oil prices surged by over 25% in 2018 due to sanctions on Iran, which directly impacted global oil supply chains. For Pakistan, which imports nearly 85% of its energy, such a scenario would lead to drastic price increases and further strain foreign reserves, already limited at around $7 billion as of 2024.
Other experts also believe that his focus would be the “diplomatic normalization” of Israel and Arab states with the sole focus on cornering Iran.
The economic realities of a potential Trump administration pose an even more immediate concern for Pakistan. Economists warn that Trump’s economic policies, including broad tariffs, immigration restrictions, and tax cuts, could reignite inflation. His proposed tariffs, in particular, could increase production costs for US companies, leading to higher prices for goods globally.
For an import-reliant country like Pakistan, this would mean higher costs for consumer goods, worsening its balance of payments, which already runs a trade deficit of approximately $25 billion. Inflation in the US, sparked by Trump’s trade policies, would likely lead to global inflation, putting Pakistan’s economy under additional stress.
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Moreover, Trump’s approach to immigration policy could reduce the availability of migrant labor in the U.S., which economists argue would push wages and prices higher. For Pakistan, the effects could be severe: higher U.S. inflation would likely push the Federal Reserve to keep interest rates elevated or even raise them.
In fact, the most important event (for the global economy too) for Pakistan is not the US elections but Federal Reserve’s meeting on November 7, where it will determine the future of US interest rates. If rates remain high or rise further, the US dollar will strengthen, making debt-servicing more costly for countries like Pakistan that rely on dollar-denominated debt.
Pakistan’s external debt becomes increasingly hard to manage as the dollar strengthens, driving up the rupee’s depreciation and adding to inflation.
Increased interest rates in the US would also have a profound impact on Pakistan’s currency and inflation. As the dollar appreciates, the rupee would likely depreciate, making it even more challenging for Pakistan to pay for essential imports like food and fuel.
Food inflation in Pakistan was already high at around 38% as of 2024, and a depreciating rupee could push these prices higher. This would worsen the country’s inflation, further diminishing purchasing power and eroding economic stability.
It’s also worth noting that with a high US dollar and rising global interest rates, Pakistan’s balance of payments would come under significant strain, as the cost of borrowing for future projects would also rise. This could impede essential infrastructure projects and limit the government’s ability to invest in development.
Another Trump presidency, therefore, could create global economic turbulence with particular implications for emerging markets like Pakistan, which is especially vulnerable to inflationary shocks and currency volatility.
While his rhetoric might appeal to some as a shake-up of the political establishment, his policies could have a ripple effect, raising costs globally and straining economies reliant on imports.
With Pakistan’s dependence on foreign energy and raw materials, any increase in global inflation would be felt acutely, underscoring the need for Pakistan to strengthen its own economic policies rather than relying on external factors to drive improvement.
Instead of hoping for relief from foreign leaders, we should focus on fortifying the country’s economy from within. This means addressing inflation, encouraging domestic production, and stabilising the rupee by bolstering foreign reserves.
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Real progress will come from sound fiscal management and reform, not from political shifts abroad.
The upcoming Fed meeting holds much greater significance for Pakistan’s economic outlook than the US presidential race, and it serves as a reminder that global economic forces, particularly those affecting currency and inflation, will shape Pakistan’s future more than any one leader’s foreign policy agenda.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is an international energy and economic analyst. He works at Primary Vision Network — a US-based market intelligence and consultancy firm
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