Pakistan tariffs recast: Islamabad sees opening in Trump’s trade push, presses India dialogue

Tariffs flip the South Asia trade equation

Pakistan’s foreign minister has done something rare in trade diplomacy: he’s turned a headwind into a talking point. After months of railing against Washington’s tariff wave, Ishaq Dar now calls it a chance to move fast, lock in better access, and jump ahead of India in the US market. The math that’s driving the rethink is stark—Indian goods now face a cumulative 50% tariff after the White House layered a fresh 25% on top of an earlier 25%, while Pakistan says it negotiated its rate down to 19% from a proposed 29%.

On paper, that spread is huge. It shifts the US entry price for competing South Asian products—think apparel basics, home textiles, leather goods, surgical tools—from nearly level to sharply tilted. If you sell T-shirts or towels into big-box retail in the US, price gaps like this can move purchase orders worth millions. It’s why Islamabad is suddenly treating the trade fight not as a shock, but as a window.

Officials are leaning into that story. Finance adviser Khurram Schehzad has framed the tariff gulf as a "strategic opening," and Dar, speaking at the Atlantic Council, went further: he says a comprehensive deal with Washington could be done “within days, not weeks or months.” That’s bold. It suggests the White House could tweak tariff lines quickly by executive action, rather than waiting for a full treaty process that would need Congress.

There’s a reason Pakistan is pressing the gas. The United States is already its biggest export market. State Minister for Finance Bilal Azhar Kayani puts last year’s number at $6 billion to the US out of roughly $32 billion in total exports. In a thin-margin game like textiles, a 31-point price advantage versus India (19% vs 50%) can flip buying decisions fast—especially if buyers are hunting for alternatives amid higher tariffs on India, China, and parts of Southeast Asia.

Even so, this is a high-wire act. The initial US tariff shock slammed confidence in Karachi, wiping more than 5% off the stock market and triggering a temporary trading halt. Since then, the narrative has shifted as the Pakistan rate landed at 19% and the India burden climbed. But markets remember. If talks sputter or the US tweaks rules again, expect another bout of whiplash.

Sector by sector, the clearest winners are Pakistan’s long-time export pillars. Home textiles from Faisalabad, knitwear and garments from Lahore and Karachi, footballs and surgical instruments from Sialkot—these are already familiar to US buyers. A tariff edge could help Pakistan retake some ground it ceded to India and Vietnam in recent years. Leather goods and denim could benefit as well, provided factories can scale and meet compliance checks that have grown tighter across US retail.

That compliance point matters. Tariffs are only one lever. US customs has become more aggressive about tracing inputs, stamping out transshipment, and demanding proof on labor standards. Pakistan will need clean supply chains, verifiable origins, and factory audits ready to go. Buyers now ask about cotton traceability, wastewater treatment, and wage practices as standard homework. The opportunity is real, but the bar is higher than it was five years ago.

There’s also the quiet logistics math. Can exporters get enough yarn, dyes, and accessories at short notice? Are ports and shippers ready for a jump in westbound volumes? Freight costs have been rising again on some routes. Even modest bottlenecks—container delays, customs backlogs, port congestion—can eat the margin that the tariff edge just created.

One new piece in Dar’s pitch is critical minerals. He says talks with Secretary of State Marco Rubio include cooperation on mining and supply chains—areas Washington wants to diversify for strategic reasons. Pakistan’s mineral map includes copper and gold prospects, plus chromite and rock salt. If the US is trying to build non-China supply lines for energy transition inputs, early-stage partnerships with countries like Pakistan could move faster than classic free trade deals. It’s an angle to watch because minerals sit at the intersection of commerce and geopolitics.

What about Bangladesh, Vietnam, and China—the other big names in US shelves? Islamabad believes many of those competitors are now facing higher tariff headwinds than it is. If that holds, the tariff calculus could give Pakistan pricing power beyond the India comparison alone. But Vietnam has speed and scale, and Bangladesh has volume and specialization in basics. Pakistan will have to earn the new orders with reliability and quality, not just a spreadsheet advantage.

Can a deal really land “within days”? It depends on the vehicle. If the White House is using executive authorities to adjust a targeted tariff regime, it has flexibility. If the idea is a broader agreement that touches rules of origin, quotas, and dispute settlement, then legal scrub and interagency reviews tend to stretch timelines. Past administrations have used executive levers for quick tariff moves, then spent months hammering details. Expect a sprint followed by a jog, not a straight sprint.

There’s also the WTO shadow. A differential tariff against a specific country raises Most-Favored Nation questions. Washington has defended these moves in the past by citing national security or trade enforcement powers. India could challenge and retaliate, and it could try to reroute more goods to Europe, the Middle East, and Africa. Pakistan’s opportunity is real, but it sits inside a larger game that could shift with one legal ruling or a negotiated truce.

At home, the bigger constraints are not diplomatic. They are structural. Power shortages and high energy costs have hammered margins in Pakistani manufacturing. Currency swings make forward planning harder. Credit is tight, and smaller exporters often can’t finance raw materials at scale. If orders jump and factories can’t deliver on time, buyers will revert to established suppliers. The policy follow-through—energy reliability, export financing, and customs facilitation—will decide whether the tariff window becomes a runway.

One small upside: services aren’t tariffed the same way. Pakistan’s IT and business-process firms don’t face the same customs hurdles, and while the current US moves target goods, they can spark broader commercial conversations. If Washington and Islamabad are talking trade every week, side deals on digital services, training, or compliance tech might pop up faster than a full goods deal.

For now, exporters are reading signals. Big US retailers plan their fall and holiday assortments months ahead. If Pakistan can present guaranteed capacity and competitive pricing by category—bath linens, knit tops, denim bottoms, leather accessories—it can win tests that turn into longer programs. A handful of pilot orders landing on time can snowball. Conversely, one missed delivery can shut the door until next season.

Diplomacy, the ceasefire, and the India factor

Dar’s trade optimism comes wrapped in a diplomatic reset. Islamabad has publicly praised President Trump and Secretary Rubio for helping broker an India-Pakistan ceasefire in May 2025. That’s striking language given the caution that usually surrounds third-party involvement in South Asia’s most sensitive rivalry. Trump has claimed that his pressure campaign and personal outreach helped avert a deeper crisis. New Delhi disputes that, repeating its long-held stance that bilateral issues are just that—bilateral.

Still, Pakistan’s tone has shifted. Dar is appealing directly for improved dialogue with India, while also welcoming American engagement to lower the temperature. The logic is practical: stability on the Line of Control and calmer rhetoric reduce risk premiums and make long-term trade planning possible. When border tensions flare, insurance costs and shipping timelines tick up, and buyers discount the region’s reliability. A working ceasefire, even a fragile one, can translate into real money.

There’s also messaging to Washington. By framing Pakistan as a responsible actor ready for talks with India, Islamabad is trying to align commercial requests with security cooperation. In US policy debates, those files often sit side by side. If State and USTR hear the same pitch—trade facilitation plus de-escalation—they can push in tandem. It’s a more coherent case than the whiplash of complaint one week and concession the next.

India’s counter-moves are the wild card. New Delhi can throw its weight into other markets, subsidize key exporters, or harden rules for imports from Pakistan. It can test the tariff wall by leaning on US corporate ties and governors in states that host big buyers. And it can try to split Washington’s hawkish trade instincts from its strategic ambition to keep India close as a counterweight in the Indo-Pacific. None of that is theoretical; India has played versions of these cards before.

For Pakistan, the safest path is to out-compete cleanly—build a case on price, reliability, and standards—and keep the bilateral temperature with India from spiking. That means guarding against transshipment schemes that would anger US customs, tightening export documentation, and investing in the factory upgrades buyers now expect. It also means staying predictable on the macro side. An exporter won’t quote aggressively if the power tariff changes mid-season or the currency swings 10% in a month.

Three scenarios are in play:

• Fast track: The US trims or clarifies lines that matter most to Pakistan, the 19% rate sticks, and pilot orders kick off a broader shift in buying through 2025. Islamabad delivers energy relief and faster customs clearance, which anchors repeat business.
• Slow burn: Talks drag. The tariff gap with India remains but is messy to use. Buyers test Pakistan but keep their core programs in Vietnam and Bangladesh. Export gains show up, but they’re modest.
• Snapback: Legal or political changes shrink the India penalty or raise Pakistan’s rate. The market gives back early gains, and Islamabad pivots to damage control while trying to hold onto any new business it won.

Inside those paths, the credibility test is simple. If Pakistan wants US buyers to move quickly, it needs to move quickly at home. Ease up port procedures for export inputs. Offer clear energy pricing for exporters over the next 12 months. Expand export credit and hedge tools for SMEs that land their first US contracts. And demonstrate early that factories can pass third-party audits without the “surprise” fixes that derail orders weeks before shipment.

The geopolitical layer won’t disappear. Washington is using tariffs to reshape supply chains and to send signals to rivals and partners alike. Islamabad is trying to read that moment and plant its flag in categories where it’s already known. The pitch is pragmatic: give us a bit of preferential room, and we’ll deliver steady, compliant goods into your market at prices that beat the field. If that pitch holds, the share-of-wallet shift away from India could start quietly with staple SKUs before it shows up in headline trade tables.

It’s worth remembering how quickly this turned. When the first tariff headlines hit, Karachi’s market sank more than 5%, and exporters feared blanket damage. Weeks later, officials are talking about landing a deal “within days.” That swing tells you how political this trade regime is—and how fast it could change again.

For now, the opportunity is there: a 19% rate for Pakistani goods versus 50% for India in the US market, with higher hurdles for other regional rivals. The ceasefire language and outreach to New Delhi aim to lower the background risk that spooks big buyers. And Washington’s interest in minerals gives both sides a second track to make progress even if textiles get stuck. It’s an unusual mix, but it’s a coherent one.

One final point that exporters keep coming back to: buyers value boring. They want steady prices, on-time shipments, no surprises at customs, and clean audits. If Islamabad can make the next six months boring for exporters—in the best possible way—it can turn today’s tariff anomaly into next year’s purchase plan. That’s the difference between a headline bounce and a durable shift.

The government’s public posture has already shifted from complaint to execution. The next test is paperwork and power meters, not podiums. If the promised “days” turn into a quiet executive tweak that codifies the 19% rate and tidies up a few product lines, procurement teams will notice. And if a handful of those teams move even 5–10% of their orders, the export math that Kayani outlined—$6 billion to the US out of $32 billion total—starts to look meaningfully different by the end of the fiscal year.

That’s why Islamabad is treating the moment as bigger than a one-off concession. It’s a chance to reset how it talks to Washington on trade and to India on security at the same time. If the ceasefire holds, and if energy and financing support line up at home, Pakistan could punch above its weight in the one market that matters most. The window is open. Now it’s about delivery.

In short, the government sees Pakistan tariffs not as a punishment, but as leverage—something to convert into contracts, not complaints. Whether that holds depends on decisions landing in the next few weeks in Washington and a handful of ministries in Islamabad. The pieces, for once, appear to fit.