The Trump tariffs appear less a product of coherent trade policy and more a negotiating tactic — a dramatic opening bid designed to quickly establish a new tariff baseline as an outside option for trade talks.
The tariff measures are intentionally broad and imprecise, based more on rough, back-of-the-envelope calculations than the usual product- and country-specific analyses that underpin conventional trade policymaking.
This approach is consistent with Trump’s well-known deal-making ethos: start with a sledgehammer to get attention, then negotiate from a stronger position. Already, over 50 countries have contacted the White House to initiate trade discussions.
For Pakistan, understanding this context is crucial. The sharp increase in tariffs on Pakistani exports is not a targeted or deliberate move against the country, but part of a broader global gambit aimed primarily at larger players like China, the EU, and Mexico.
Given Pakistan’s relatively modest trade footprint in the US, it lacks the leverage to retaliate or influence US trade decisions. Instead, Pakistan should treat these tariffs as a temporary headwind and respond with a smart, strategic negotiation plan.
A mutually beneficial approach would be to reshape Pakistan’s import strategy by focusing on US goods and services that can strengthen Pakistan’s long-term productivity and competitiveness. A thorough analysis of imports that offer the best value in balancing upfront costs with long-term gains can guide informed decisions. Priority areas might include advanced ICT and digital infrastructure, modern agricultural technologies, and equipment supporting the energy transition.
These intentional, productivity-enhancing imports would address US concerns about bilateral trade imbalances while advancing Pakistan’s development agenda. Conversely, simply increasing imports of soybeans, wheat, or cotton to superficially reduce the trade deficit - as some commentators have suggested - is a shortsighted fix.
To maximize this strategy, Pakistan must also build institutional capacity for trade analysis, deal evaluation, and negotiation. Historically, we have missed numerous opportunities -such as during both phases of the Pakistan-China Free Trade Agreement - largely due to inadequate preparatory analysis.
The current, fast-changing trade landscape presents both risks and openings that require trade intelligence and skilled negotiation to navigate effectively. For example, in response to the US tariffs, China has banned the export of 16 rare earth elements to American companies.
Given the US priority to secure stable and diversified supply chains for critical minerals essential to the energy transition, this shift presents an opening for Pakistan’s own mining sector to fill potential supply gaps.
Beyond bilateral concerns, Pakistan must recognize the broader shifts unfolding in global trade architecture and position itself accordingly.
Aggressive US trade policy is undermining trust and accelerating diversification away from American markets. While the US is currently the world’s largest importer—accounting for 13.2% of global imports – this share is projected to fall as the US isolates itself behind tariff walls, and more economies diversify by strengthening trade with each other.
The new tariff announcements are likely to cement trends that were already underway. For example, the EU has already signed deals with Mercosur, updated its agreement with Mexico, and resumed talks with India.
The UK has joined the CPTPP, and Asian countries have consolidated under the RCEP mega-agreement, which notably excludes the US. These moves suggest that future trade flows will increasingly run through regional blocs, with traditional US partners hedging their bets.
In Asia, businesses and investors are exploring “America plus one” strategies — intentionally reducing reliance on the US market by diversifying trade and investment into alternative regions.
The more the US uses tariffs as a weapon, the more other countries and businesses seek immunity to that weapon. If these protectionist trends continue, the US risks diminishing its global economic influence.
Meanwhile, more open and stable economies are likely to expand their global standing — offering more predictable, rules-based trade environments that attract business and investment.
Though realignment will take time, especially given the current scale of trade with the US, Pakistan must begin laying the groundwork now. This includes developing new trade relationships, reducing overdependence on any single market, and positioning itself for growth in emerging markets. For Pakistan - situated in a poorly integrated region with weak trade ties to its neighbors - this is a particularly difficult challenge, but one that must now be tackled head-on.
Finally, Pakistan must build internal capacity for trade intelligence and policy design. This is critical not only to respond swiftly to global shocks and opportunities but also to negotiate better deals moving forward. The current moment demands not only agility, but ambition - a shift from reactive crisis management to proactive, strategic engagement with the global economy.
Copyright Business Recorder, 2025
The writer is an economist, teaching at the Lahore University of Management Sciences. She can be reached at nazishafraz@lums.edu.pk
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