U.S.-Pakistan Tariff Negotiations: Strategies, Challenges, and Competitive Advantages

Overview
Pakistan’s delegation aims to address the 29% tariff imposed by the U.S. in 2025 and boost trade, proposing tariff cuts on U.S. goods and highlighting mutual benefits. Given historical trade negotiations under President Trump, outcomes are likely to involve partial tariff reductions and ongoing dialogue, though success depends on Pakistan’s concessions.

Potential Tariff Adjustments
The evidence leans toward a partial reduction of the tariff, especially for textiles, which account for 75-80% of Pakistan’s $5.5 billion annual exports to the U.S. Pakistan could offer to lower its 58% tariffs on U.S. goods, such as cotton and soybeans, in exchange for relief, aligning with Trump’s reciprocal tariff policy.

Framework for Future Talks
It seems likely that the talks could establish a framework for continuous dialogue, similar to the U.S.-Pakistan Trade and Investment Framework Agreement (TIFA) discussions in 2023, fostering incremental trade liberalization .

Economic and Geopolitical Considerations
Pakistan might mitigate the tariff’s $600-700 million impact by showing mutual benefits, such as its role as a strategic ally in counterterrorism, potentially influencing U.S. decisions. However, U.S. domestic priorities, like reducing the $1.2 trillion trade deficit, could limit concessions .

Unexpected Detail: Competitive Advantage
An unexpected detail is that Pakistan gains a competitive edge over rivals like Bangladesh (37% tariff) and China (54%), which face higher U.S. tariffs, potentially offsetting some losses if negotiations succeed.

Detailed Analysis of Expected Outcomes and Historical Context

This section provides a comprehensive analysis of the expected outcomes for Pakistan’s delegation visit to the U.S. in April 2025, addressing the 29% tariff on Pakistani exports and efforts to boost bilateral trade. The analysis draws on historical trade negotiations under President Donald Trump’s administration, current trade dynamics, and Pakistan’s proposed strategy of offering tariff cuts on U.S. goods while highlighting mutual benefits, trade balance data, and long-term partnership potential.

Background and Current Context

On April 2, 2025, President Trump imposed a 29% reciprocal tariff on Pakistani exports, calculated based on the U.S. trade deficit and Pakistan’s 58% tariffs on U.S. goods, as part of a broader policy targeting over 60 countries to address trade imbalances. This tariff, effective immediately, threatens Pakistan’s $5.5 billion annual exports to the U.S., with textiles accounting for 75-80% of this total. The Pakistani government, responding on April 7, 2025, decided to send a delegation to negotiate, focusing on reducing the tariff and enhancing trade ties.

Pakistan’s strategy, as suggested, involves offering tariff cuts on U.S. goods (e.g., cotton, soybeans, meat, with current tariffs at 0-10%) and emphasizing mutual benefits, supported by data on the $3 billion trade surplus favoring Pakistan in 2024 (U.S. exports $2.1 billion, imports $5.1 billion) . The delegation also aims to highlight long-term partnership potential, leveraging Pakistan’s strategic role in counterterrorism and its 240 million consumer market.

Historical Precedents Under Trump’s Administration

Historical trade negotiations during Trump’s first term (2017-2021) provide insight into potential outcomes. Trump’s approach was protectionist, using tariffs to force concessions, often framed as addressing trade deficits and unfair practices. Key examples include:

• USMCA Negotiations (2017-2020): Trump threatened 25% tariffs on Canadian and Mexican goods, leading to the renegotiation of NAFTA into the USMCA. Canada and Mexico made concessions on digital trade, intellectual property, and automotive rules of origin to avoid tariffs. This resulted in tariff exemptions for compliant goods, suggesting Pakistan could secure sector-specific relief.
  
• China Trade War (2018-2020): Tariffs up to 25% were imposed on Chinese goods, with negotiations leading to temporary suspensions (e.g., June 2019 G20 Osaka summit, where China agreed to buy more U.S. farm products, though commitments were vague) . This indicates that while tariffs were used as leverage, outcomes depended on reciprocal concessions.
  
• South Korea (2018): Trump renegotiated KORUS, threatening tariffs unless South Korea increased U.S. automobile purchases and addressed trade imbalances, leading to a revised agreement with tariff adjustments. This shows that targeted concessions can mitigate tariffs.

These precedents suggest that Pakistan’s success will hinge on offering concrete concessions, such as reducing tariffs on U.S. goods, and addressing U.S. concerns about trade deficits.

Expected Outcomes

Based on historical patterns and current dynamics, the following outcomes are anticipated:

1. Partial Tariff Reduction or Exemptions:
   • Likelihood: High, given historical examples of sector-specific relief (e.g., USMCA agricultural exemptions). Pakistan could negotiate a reduction from 29% to 15-20% for textiles, especially given competitors like Bangladesh (37%) and China (54%) face higher tariffs, providing Pakistan a competitive edge.
   • Condition: Pakistan must offer significant tariff cuts on U.S. goods, such as reducing the 58% tariff on machinery or 20% on iron and steel, to align with Trump’s reciprocity policy .
   • Impact: This could save $200-300 million in export revenue, mitigating the estimated $600-700 million loss .
2. Framework for Ongoing Trade Talks:
   • Likelihood: Moderate, as Trump’s administration often established mechanisms like TIFA for continuous dialogue. The 2023 TIFA talks, though stalled, could be revived, leading to joint working groups.
   • Condition: Pakistan must demonstrate commitment through data on trade balance ($3 billion surplus) and long-term partnership potential, such as increased U.S. market access for services or critical minerals.
   • Impact: This could foster incremental trade liberalization, potentially increasing bilateral trade from $7.3 billion in 2024.
3. Mitigation of Economic Impact:
   • Likelihood: Moderate, as Pakistan can argue the tariff disproportionately harms its economy compared to U.S. benefits. During FY2025 (first seven months), exports to the U.S. totaled $3.6 billion, with 79% textiles, facing a 49% effective tariff on garments .
   • Condition: Pakistan must show how reducing the tariff aligns with U.S. interests, such as maintaining a stable supply chain for textiles amid tensions with China.
   • Impact: Partial relief could preserve market share against competitors, leveraging higher tariffs on Bangladesh (37%) and Vietnam (46%).
4. Geopolitical Leverage:
   • Likelihood: Low to Moderate, as Trump’s focus is economic, but Pakistan’s role in counterterrorism and regional stability could influence outcomes. Historical examples (e.g., post-9/11 GSP status for Pakistan) suggest strategic alliances can sway trade decisions.
   • Condition: Pakistan must tie trade concessions to broader cooperation, such as intelligence sharing, though this may not directly reduce tariffs.
   • Impact: Could enhance negotiating position, but likely secondary to economic arguments.

Challenges and Uncertainties

Several factors could complicate outcomes:

• U.S. Domestic Pressure: Trump’s policy aims to reduce the $1.2 trillion trade deficit, and Pakistan’s $3 billion surplus is minor, potentially limiting urgency for concessions.
• Pakistan’s Constraints: High energy costs and limited export diversity (textiles dominate) weaken competitiveness, historically limiting gains from trade diversion (e.g., 2018-2020, when Bangladesh and India benefited more) .
• Global Trade War Risks: With China imposing 34% retaliatory tariffs and the EU contemplating countermeasures, a full-blown trade war could shrink U.S. demand, offsetting bilateral gains.

Comparative Analysis: Pakistan vs. Competitors

Pakistan’s position is nuanced compared to competitors, as shown in the table below, based on U.S. tariff rates and export composition:

This table highlights Pakistan’s relative advantage over Bangladesh and China, potentially offsetting losses if negotiations succeed.

References:

https://tribune.com.pk/story/2538430/pakistan-to-initiate-talks-with-trump-administration-over-29-tariff
https://tribune.com.pk/story/2537641/trump-imposes-29-tariff-on-pakistan-as-part-of-new-trade-policy
https://ustr.gov/countries-regions/south-central-asia/pakistan
https://casstt.com/us-tariff-policies-implications-for-pakistans-trade/
https://www.trade.gov/country-commercial-guides/pakistan-import-tariffs
https://tribune.com.pk/story/2537826/us-slaps-higher-duties-on-pak-competitors
https://profit.pakistantoday.com.pk/2025/04/04/pakistans-textile-exports-to-be-badly-hit-by-new-us-29-tariff/
https://www.brecorder.com/news/40355787
https://tribune.com.pk/story/2537825/pakistan-opts-for-diplomacy-on-trumps-tariff-war
https://www.whitehouse.gov/fact-sheets/2025/04/fact-sheet-president-donald-j-trump-declares-national-emergency-to-increase-our-competitive-edge-protect-our-sovereignty-and-strengthen-our-national-and-economic-security/
https://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far
https://en.wikipedia.org/wiki/Tariffs_in_the_first_Trump_administration
https://www.nytimes.com/2025/03/13/business/economy/trump-tariff-timeline.html
https://en.wikipedia.org/wiki/History_of_tariffs_in_the_United_States
https://time.com/7274195/trump-reciprocal-tariffs-world-responses-china-eu-countries-leaders-countermeasures/