On Donald Trump’s inauguration day Western media was left struggling for headlines. His supporters focused on his anti-immigration executive orders, and his pledge to direct members of his cabinet “to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and price.”
His detractors are still expressing indignation at his pardoning the 6 January 2020 convicted rioters, taking USA out of the Paris Climate accord and World Health Organisation (WHO) with some ridiculing his intent to take over the Panama Canal, buy Greenland from Denmark and rename Gulf of Mexico as Gulf of America.
America’s allies are no doubt focused on his statement that “instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens. For this purpose, we are establishing the External Revenue Service to collect all tariffs, duties, and revenues.”
In his first week in office, Trump announced 25 percent tariffs on Canada and Mexico, with China to face an additional 10 percent. In his virtual address to the World Economic Forum, Trump expressed concern at the recent decisions by the European Union to penalise some US companies, including Google.
The US European allies are equally concerned about Trump’s policy on Ukraine and NATO, while the Muslim world is riled up about his reported green-lighting Netanyahu to merely pause, not end, the genocide of Palestinians. There is thus an entire range of bad for most countries in Trump’s one week of public interactions – allies and foes alike. Pakistan is no exception.
A continuing general perception in Pakistan is that stakeholders remain concerned at the possibility of overt pressure by the Trump administration towards political reconciliation.
And there is concern over the number of Pakistanis who will be impacted by his anti-immigration policy decisions however while in recent years’ Pakistani administrations have air-lifted nationals caught in conflicts abroad, due largely to the effective use social media by those affected, yet they have been at best ineffective and at worst reticent in seeking remedies for changes in immigration laws affecting Pakistani nationals.
Tariffs (country-specific) instead of sanctions (whose impact is felt not only by the country sanctioned but also those that trade with it) is Trump’s stated position (though it is doubtful if he will lift existing sanctions).
This may ease short-term concerns by an increasing number of countries proactively seeking membership of BRICS - Brazil, Russia, India, China and South Africa - but the medium to long term concerns will be determined by ground realities.
From a Pakistani perspective last month the US imposed sanctions on Pakistan’s state-run missile development agency and three domestic based private vendors maintaining that Islamabad’s long range ballistic missile programme could enable it to target regions beyond South Asia. In addition, the Iran-Pakistan gas pipeline remains hostage to US sanctions against Iran.
And needless to add, Pakistan has a trade surplus with the US, one of the few countries with which Pakistan has a surplus, and it should be a source of concern if the US President decides to use this as a tool to compel a policy revision – be it in the economic or domestic political context or indeed within the realm of US geopolitical considerations.
Pakistan’s decision to phase out tariffs, a major source of the country’s revenue, in compliance with the International Monetary Fund’s (IMF’s) ongoing programme condition, accounts for even higher reliance on indirect taxes (up to 75 to 80 percent of total collections) whose incidence on the poor is greater than on the rich – a decision which will almost certainly exacerbate the poverty levels, which at present are a disturbing 41 percent. However, Pakistan is not in a position to take independent tax decisions given its fragile economy.
President Trump argued that US inflation was brought on by “massive overspending and escalating energy prices,”– policy decisions taken by his predecessor to take the country out of a recession.
Trump’s narrative may resonate with Pakistani economists, as our successive administrations have injected an ever rising amount for current (as opposed to infrastructure) expenditure, with serious inflationary implications. The incumbent government is no exception, as it increased non-development outlay by a whopping 21 percent in the current fiscal year.
Trump also took America out of the Paris climate accord, declared a national energy emergency, and announced the restart of drilling banned by the Biden administration.
Trump further stated during his inaugural speech that his administration would revoke the electric vehicle mandate – Environmental Protection Agency rule requiring auto manufacturers to cut greenhouse gas emissions by half in new light (for 30 to 56 percent) by 2032 and medium duty (20 to 32 percent) vehicles by 2027.
The US provides 22 percent of UN Framework Convention on Climate Change Secretariat’s budget, with its operating costs estimated for the current year at 96.5 million dollars. Michael Bloomberg, the US billionaire, who serves as the UN Special Envoy on Climate Ambition and Solutions, has pledged to meet these costs and uphold the country’s reporting commitments.
In a statement he said, “from 2017 to 2020, during a period of federal inaction, cities, states, businesses, and the public rose to the challenge to uphold our nation’s commitments – and now, we are ready to do it again.”
United Nations Development Programme (UNDP) maintains that in Pakistan “the cumulative effects of climate change directly impact the economy, costing the country an estimated USD 38 billion annually (WB and ADB 2021). If this trend continues, it will reverse human development gains made over the last decade.
Already, in 2020 Pakistan ranked 154 out of 189 countries on the United Nations Human Development Index, down two places from 152 the previous year….If Pakistan is to tackle the climate challenges that lie ahead, it cannot do so without all stakeholders’ full and equal participation.”
The COP 29 deal struck in Baku of a 300 billion dollars a year fund for poor countries to help them cope with the impacts of climate change, rejected as insufficient by the developing world, will be affected as US share for the Fund was 9.5 billion dollars in 2023.
Trump has declared an energy emergency and his policy is to drill and export to Europe. There is no doubt that Pakistan faces an acute energy crisis but disturbingly its resolution is being left to politicians with little or no expertise in the subject matter and who are supporting renewables through fiscal and monetary incentives at a pace that would raise the energy sector capacity payments to the Independent Power Producers as demand from the national grid, largely by the middle to rich income levels, declines.
Trump took the country out of the WHO and during his press briefing in the Oval office justified it by saying that the US paid 500 million dollars with only 335 million people while China with a population of 1.4 billion people paid only 29 million dollars. He claimed that during his previous administration, WHO agreed to US paying 29 million dollars but Biden then agreed to pay 500 million dollars.
And finally, Trump stated that his administration will set up the brand new Department of Government Efficiency, to be headed by Elon Musk, and in this context one would be forced to recall Ronald Reagan’s 24 April 1985 speech: “Every dollar the government spends comes out of your pockets.
Every dollar the government gives to someone has to be first taken away from someone else. So it’s our moral duty to make sure that we can justify every one of your tax dollars, that we spend them wisely and carefully and, just as importantly, fairly.”
Reagan ended the speech with a legitimate call to Democrats, Republicans, and Independents to “give me your help to put our financial house in order so that our tax, spending and monetary policies will not hinder growth but encourage it; not send inflation and interest rates shooting up but keep them heading down, and not drown us under a tidal wave of debt but protect us under a safe harbour of stability with a sound and powerful economy.” It can only be hoped that focus on right-sizing by Pakistan’s cabinet members is evident on the ground rather than, as during previous administrations, remains a mere political slogan.
Copyright Business Recorder, 2025
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