PIDE Warns of Major Job Losses if U.S. Tariffs on Pakistani Exports Are Imposed
ISLAMABAD – A recent study by the Pakistan Institute of Development Economics (PIDE) has raised serious concerns about the potential impact of proposed U.S. tariffs on Pakistani exports, urging immediate action to diversify the country’s export base and protect its economy.
The policy note, titled “Impact of Unilateral Tariff Increase by the United States on Pakistani Exports”, was conducted by economists Dr. Muhammad Zeshan, Dr. Shujaat Farooq, and Dr. Usman Qadir. It examines the consequences of a proposed 29% reciprocal tariff increase on Pakistani goods entering the United States.
A Wake-Up Call for Export Diversification
PIDE describes the proposed tariffs as a looming threat to Pakistan’s economy, warning that they could lead to macroeconomic instability, large-scale job losses, and a significant drop in foreign exchange earnings. The United States is Pakistan’s largest single-country export destination, accounting for $5.3 billion in exports in fiscal year 2024 — much of which comes from the textile and apparel sectors.
If the proposed tariffs go into effect, the combined duty — when added to the existing 8.6% under the Most Favoured Nation (MFN) status — could rise to 37.6%. This could result in a 20–25% decline in exports to the U.S., with estimated annual losses between $1.1 and $1.4 billion.
Threat to Half a Million Jobs
The textile sector is expected to bear the brunt of the impact. PIDE estimates that over 500,000 jobs could be at risk if companies like Nishat Mills and Interloop are forced to cut back on production. Other sectors such as leather, rice, surgical instruments, and sporting goods are also considered vulnerable to increased trade barriers.
Regional competitors like India and Bangladesh, which enjoy more favorable trade terms, could potentially seize Pakistan’s market share in the U.S., the report noted.
Turning Crisis into Opportunity
Despite the risks, PIDE views this situation as a strategic opportunity for Pakistan. In the short term, the institute recommends:
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Launching diplomatic efforts to emphasize mutual trade benefits and seek exemptions.
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Exploring tariff reductions on select U.S. imports such as machinery, petroleum, and scrap metal to create negotiation space.
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Encouraging Pakistani manufacturers to use U.S.-origin inputs like cotton and yarn to strengthen trade linkages.
In 2024, the U.S. exported $181 million worth of cotton to Pakistan, highlighting the interconnected nature of trade between the two nations.
Long-Term Vision: Diversification and Innovation
For the long haul, PIDE strongly advocates for a broader export strategy that includes:
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Diversifying export products and markets beyond traditional sectors and regions.
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Targeting emerging markets such as the European Union, China, ASEAN countries, Africa, and the Middle East.
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Investing in IT, halal food, processed foods, sports goods, and other non-traditional export sectors.
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Reducing energy and logistics costs, simplifying export regulations, and fostering innovation and technology adoption.
Global Trade Rules and the WTO
The report also points out that the proposed U.S. tariffs exceed WTO’s bound tariff ceiling of 3.4%, potentially violating international trade agreements. While legal action through the World Trade Organization (WTO) remains an option, Pakistan’s limited fiscal capacity may make such efforts challenging.
Nonetheless, the study emphasizes that these tariffs could disrupt global supply chains — especially the U.S.-Pakistan textile value chain, where American cotton is processed in Pakistan and re-exported as finished garments.
A Call for Strategic Reforms
PIDE concludes that while the path ahead is challenging, it offers a unique opportunity for Pakistan to reform its export landscape. With timely diplomacy, targeted reforms, and proactive diversification, the country can build a more resilient and competitive export sector.
