US tariff shifts may help Pakistan’s economy: report

The recent US tariffs on China, Mexico, and Canada are likely to positively affect Pakistan’s economy, mainly because of its import-dependent economic structure.

The tariffs could lead to a decrease in global commodity prices, especially oil, as the US dollar strengthens and interest rates remain high. This reduction in commodity costs would help lower Pakistan’s import bills, benefiting industries like textiles and technology.

According to AKD Securities, the US’s tariff measures will likely lower global commodity prices due to a stronger dollar and higher US interest rates, which will last longer as global economic growth slows down. Although the tariffs will remain until the countries address issues like drug trafficking and migration, a breakthrough occurred when Mexico and Canada secured deals to avoid the tariffs.

For Pakistan, the US remains the largest export market, accounting for 19% of exports in the first half of FY25. There is no expectation of direct tariffs on Pakistani goods due to their small proportion in US imports. Additionally, concerns over the freeze in US aid are expected to have minimal financial impact, as only $21 million was budgeted for USAID grants in FY25.

Pakistan’s currency is expected to remain stable, supported by increased foreign inflows, remittances, and a reduced import bill. With the US aid freeze and shifting trade dynamics, the market has already started to reflect improved economic indicators. The firm anticipates a 250 basis point cut in interest rates in 2025, which could benefit sectors such as banking, energy, textiles, and technology stocks.