Pakistan’s Textile Sector Braces for Impact as Trump Imposes New Tariffs

Pakistan’s top export destination just got a lot more expensive. The United States has imposed new reciprocal tariffs on several countries, including Pakistan, with duties ranging from 10 to 48 percent. For Pakistan, the hit comes mainly in textiles, which now face a 29 percent tariff, slightly higher than India’s 26 percent, but lower than the 29 to 46 percent slapped on Vietnam, Bangladesh, and China, Topline Securities said in a report. Though Pakistan makes up just 0.16 percent of US imports, the US is Pakistan’s single largest customer, accounting for 18 percent of the country’s total exports, worth around $6 billion annually. Around 75 to 80 percent of this is textiles, with the rest spread across leather goods, surgical instruments, rice, cement, salt, and steel. The new tariffs are part of a US move to protect domestic manufacturing and raise revenue. They come on top of a flat 10 percent tariff already applied to all imports. Mexico and Canada are exempt, and key goods like steel, copper, semiconductors, and pharmaceuticals are also excluded. Pakistan’s textile exporters are now squeezed between India, which enjoys a lower duty, and other competitors like Vietnam and Bangladesh, which face higher rates. While this could give Pakistan a small advantage in the US market, exporters warn that diverted shipments from those countries may flood Europe, where Pakistan also sells heavily. In textiles, Pakistan largely competes with China, India, Vietnam, Cambodia, Indonesia, and Bangladesh. The duties imposed on China, Cambodia, Indonesia, Vietnam, and Bangladesh are higher than Pakistan, while the duties imposed on India are 300bps lower than Pakistan (26 percent vs. 29 percent). Firms with significant US exposure include Interloop, Feroze Mills, Kohinoor Textile, Nishat Mills, and Gul Ahmed. Outside textiles, companies like Service Global Footwear, Matco Foods, Fast Cables, International Steels, and even cement and food producers like DG Khan Cement and Mitchell’s Fruit Farms could also feel the impact. Pak Elektron has also recently entered the US market with transformer exports. Topline said competition in the European market can increase as countries faced with higher tariffs, i.e., China, Vietnam, and Bangladesh, may now divert some of their US exports to European countries, thus putting pressure on margins.