Lahore School of Economics warns of $4.2 billion hit over five years; Pakistan sends delegation to negotiate.
Key Takeaways:
i) The Lahore School of Economics (LSE) estimates that the new US tariffs could cost Pakistan $0.8 billion in 2024 alone, and a cumulative $4.22 billion over the next five years.
ii) Pakistan’s textile sector, which constitutes a major portion of its exports, is expected to be particularly hard-hit.
iii) The Pakistani government is sending a high-level delegation to the US to negotiate and mitigate the impact of these tariffs.
Islamabad, Pakistan – April 10, 2025 – The United States’ recent imposition of a 39% tariff on imports from Pakistan is projected to inflict significant economic damage, potentially costing the country billions in lost export revenue.
The LSE’s analysis highlights the severe long-term consequences of the US tariff hike. If the full tariff burden is passed on to American consumers, Pakistan’s export earnings could plummet. However, the report suggests that the impact could be lessened if Pakistani exporters absorb some of the costs or successfully negotiate with US buyers.
These tariffs come amidst a complex global trade landscape, with the US increasing duties on several countries that compete with Pakistan. While this situation presents a potential opportunity for Pakistan to gain a competitive edge, the overall economic outlook remains uncertain. A prolonged trade war and a global economic downturn could further reduce demand for Pakistani exports, exacerbating the negative effects of the tariffs.
Pakistan’s textile industry, a cornerstone of its export sector, is particularly vulnerable. Accounting for a significant portion of Pakistan’s exports to the US, the textile sector faces a substantial threat from the increased tariffs. Textiles constitute 75-80% of Pakistan’s exports to the US.
A prolonged trade war and a global economic downturn could further reduce demand for Pakistani exports, exacerbating the negative effects of the tariffs.
In response to these challenges, the Pakistani government is actively seeking to engage with the US to find a resolution. Prime Minister Shehbaz Sharif has directed a high-level delegation, including key government officials and prominent business leaders, to travel to the US to discuss the tariffs and explore mutually beneficial trade solutions.
