The US tariff relief announced on Pakistani goods to 19%, compared to 20–25% on competing exports from India, Bangladesh, Vietnam, and Sri Lanka. While this move offers Pakistan a temporary trade advantage in the American market, economists and industry insiders warn it won’t be enough to boost exports unless structural issues are addressed at home.
Experts say high production costs, driven by steep interest rates, elevated energy tariffs, and weakened export finance incentives, continue to hamper Pakistan’s competitiveness—especially in its flagship textile sector.
KCCI on US Tariff Relief on Pakistan
“The price of electricity remains the second-highest cost component after cotton in Pakistan’s textile production,” said Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI).
Bilwani emphasized the negative impact of recent revisions to the Export Finance Scheme (EFS), which he believes have disrupted export momentum. “Retaining the EFS in its original form is vital for sustaining textile exports,” he added.
From an economic perspective, the 19% US tariff may help maintain trade volumes, but Pakistan’s elevated input costs remain a critical barrier.
Policy Research Experts on This US Tariff Relief
“The US tariff relief helps retain volume in the US market, but high production costs keep Pakistan’s export prices uncompetitive,” explained Dr. Usama Ehsan Khan, Head of Research at the Policy Research and Advisory Council (PRAC).
Dr. Khan pointed to three major cost-drivers that need urgent attention:
- Policy interest rate: Held at 11%, despite inflation dropping below the 5–7% target range. Peer economies operate between 3% and 10%.
- Electricity tariffs: Averaging around $0.16 per unit—considerably higher than $0.06–$0.10 in competitor countries.
- Gas tariffs: Still elevated, adding pressure on manufacturers and exporters.
He argued that reducing the policy rate alone could save the government Rs200–250 billion annually in interest payments and help lower business costs.
A joint PRAC-KCCI infographic also shows that Pakistan’s labour productivity lags behind regional averages, with a GDP output of $7.20 per hour worked, compared to $8.70–$18 in neighboring economies (except Cambodia, at $4).
Are Reforms Needed?
Unless Pakistan takes bold reform steps, such as renegotiating contracts with expensive independent power producers (IPPs) and cutting gas tariffs, the country risks losing out on the full benefits of this tariff relief.
On social media platforms like X, traders and economists have been calling for urgent reforms after US tariff relief, emphasizing that this diplomatic win could become meaningless if domestic issues remain unaddressed.
“Without reducing production costs, Pakistan risks missing out on the benefits of this hard-earned trade advantage,” Khan warned.
Published in SouthAsianDesk, August 6th, 2025
Follow SouthAsianDesk on X, Instagram, and Facebook for insights on business and current affairs from across South Asia.
