KARACHI: US President Donald Trump’s move to double tariffs on Indian goods presents a “strategic opening” for Islamabad to deepen its trade partnership with Washington, Pakistan’s finance adviser Khurram Schehzad said on Thursday. 

Trump signed an executive order on Wednesday to place an additional 25 percent tariff on India on top of a 25 percent tariff that went into effect on Thursday. The move made India one of the most heavily taxed US trading partners in Asia. 

Pakistan, India’s traditional arch-rival, has meanwhile improved its ties with Washington. Pakistan and the US finalized a trade agreement last week under which a 19 percent tariff was imposed on a wide range of Pakistani goods. The new rate marked a considerable reduction from the initially proposed 29 percent under a sweeping executive order signed by Trump.

 “The US tariff hike on Indian goods presents a strategic opening for Pakistan,” Schehzad told Arab News. 

Washington’s 19 percent tariff on Pakistani goods makes them less expensive than Indian goods, making Pakistan one of the countries with the lowest tariff profiles in the region.

“We see this as a moment of opportunity to deepen trade and economic ties with the United States,” the finance official added. 

The US is Pakistan’s largest export destination, State Minister for Finance Bilal Azhar Kayani said on Thursday. He added that out of $32 billion of Pakistan’s exports in the last fiscal year, $6 billion went to the US.

Pakistan’s tariff deal with the US took place at a time when Islamabad is pushing for an economic revival, buoyed by a $7 billion financial bailout package by the International Monetary Fund (IMF).

Pakistan has undertaken financial reforms over the past two years. Prime Minister Shehbaz Sharif has tasked authorities to ensure Islamabad’s $32 billion annual exports surge to over $60 billion by fiscal year 2028-29.

Pakistan, having one of the lowest regional tariff profiles and also attracting a growing US investment interest, is positioned to expand its exports, particularly in textiles, pharmaceuticals, agriculture, technology, mining & minerals, and other value-added manufacturing, Schehzad said. 
 
“This agreement will help us realize the long-term export targets we have set under Uraan Pakistan program,” he said, referring to the government’s economic plan that aims to make Pakistan a trillion-dollar economy by 2035. 

‘MAJOR OBSTACLES’

Pakistani businesspersons, especially those related to textiles, think otherwise. 
 
Atif Ikram Sheikh, president of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), said the US has imposed the lowest trade tariffs in the region on Pakistan, which Islamabad should take full advantage of.

However, he said higher production costs in Pakistan could neutralize this benefit.
 
“Taxes and high electricity and gas prices for the industry are major obstacles to taking advantage of low tariffs,” Sheikh said. 
 
The textile industry is Pakistan’s biggest foreign exchange earner, fetching $18 billion during the last fiscal year, most of which came from the US.
 
Kamran Arshad, chairman of the All Pakistan Textile Mills Association (APTMA), was also unsure whether the new trade agreement with the US would benefit Pakistan significantly. 
 
“The costly power and high interest rates would not allow us to compete (in the global textile market) at this 19 percent tariff,” Arshad told Arab News.

Last week, Pakistan’s central bank kept the policy rate unchanged at 11 percent, adopting a cautious approach. 
 
According to the APTMA, Pakistan has a higher interest rate of 11 percent, compared to India’s 5.5 percent, Bangladesh’s 10 percent, Vietnam’s 4.5 percent, Sri Lanka’s 7.75 percent, Indonesia’s 5.25 percent and Cambodia’s 3 percent.
 
The power tariff for industries in Pakistan, meanwhile, stands at $0.16 kilowatt per hour as compared to $0.096 in India, $0.10 in Bangladesh, $0.08 in Vietnam, $0.06 in Sri Lanka, $0.07 in Indonesia and $0.135 in Cambodia, the data shows.
 
Pakistani businesses are paying 29 percent corporate income tax and as much as 10 percent super tax compared to the 27.5 percent preferential taxes their competitors from India, Bangladesh, Vietnam, Sri Lanka, Indonesia and Cambodia are paying on incomes.
 
“Pakistan’s corporate tax, policy rate, labor costs, electricity rate put us at a disadvantage with India, Bangladesh, Vietnam, Sri Lanka and Indonesia,” Arshad noted.

Shankar Talreja, head of research at Karachi-based brokerage firm Topline Securities, said the US is a “big market” for pharmaceuticals, textiles and food products.

 “If Pakistan gets preferential treatment in the US market, this will help our companies grow further,” he said. 
 

NEW DELHI: India has vowed to take “all actions necessary” to protect its national interests after President Donald Trump doubled US tariffs on India to 50 percent over Delhi’s purchase of Russian oil. 

Trump signed an executive order on Wednesday to place an additional 25 percent tariff on India on top of a 25 percent tariff that is set to go into effect on Thursday, making the South Asian country one of the most heavily taxed US trading partners in Asia. 

The order finds India is “currently directly or indirectly importing Russian Federation oil,” and says it is “necessary and appropriate” to apply the new 25 percent tariff on Indian goods.

The US is India’s top export market, making up around 18 percent of exports and 2.2 percent of its GDP. 

Foreign Ministry spokesman Randhir Jaiswal said the US decision to impose additional tariffs were “extremely unfortunate,” as Delhi’s imports from Russia “are based on market factors” and done to ensure energy security for the 1.4 billion Indian population. 

“We reiterate that these actions are unfair, unjustified and unreasonable. India will take all actions necessary to protect its national interests,” he said in a statement.

The 50 percent tariff could cut Indian GDP by 0.6 to 0.8 percent, according to Arupam Manur, an economist at the Takshashila Institution in Bangalore. The cut would risk India’s economic growth slipping below 6 percent this year. 

As the combined tariffs will go into effect 21 days after the signing of the order, India still has time to negotiate with the Trump administration. 

“There is speculation that the 25 percent additional tariffs might be a negotiating tactic by the Trump administration, which can be used as a leverage point against India in the upcoming round of trade talks,” Manur said. 

“So, India will continue negotiating with the US, but the room for making concessions to the US is getting smaller due to the bad-faith nature of dealings.”

India will likely look at diversifying trade partners, as Washington becomes increasingly “unreliable trading partner with multiple ad-hoc tariff impositions.” 

“The recently concluded FTAs (free trade agreements) with Australia and the UK have come at a good time. India will hope to sign a trading arrangement with Europe as well. India will also look to strengthen its trading relationship with the Middle East,” Manur said, highlighting how UAE and Saudi Arabia are India’s third and fifth largest trading partners, respectively. 

As India exports around $81 billion goods annually to the US, the impact would be felt in India domestically in labor-intensive industries, such as gems and jewelry, apparel, textiles, auto parts, sea food and chemicals. 

Lalit Thukral, president of the Noida Apparel Export Cluster, which employs about one million people, said the 50 percent tariff rate is “too much” for his industry. 

“The 50 percent is out of reach now. We cannot do that. It means you have to close your factories, close your business … Buyers who are in the US are running away … They are placing orders to China, Vietnam or a third country. They will not come to India now,” he told Arab News.

“I have been in this field for the last 45 years and for the first time we have seen this kind of situation. This is a very horrible situation. Had we known that this trouble was coming we could have planned it, but we were not ready for this kind of thing to come.”