This opinion piece was originally published in Stratheia on 18 August 2025.
When President Trump’s 2025 “Liberation Day” executive order set baseline import duties and threatened penalties of up to 50 percent, Pakistan negotiated a 19 percent tariff on its exports — far below the punitive rates faced by many other economies, and a number that hints at a complex diplomatic calculation behind the scenes. The article contextualises this outcome: while a 19 percent duty is a significant increase on near-zero preference schemes, in a tariff matrix where several countries absorb rates in the high-30 or 50 percent range, Pakistan’s deal functions more as a lifeline than a punishment. The explanation, Dr. Mohey-ud-din argues, lies in strategic leverage — Pakistan’s control of overland routes to Afghanistan and Central Asia, its Arabian Sea positioning, and Balochistan’s untapped copper and gas deposits, which the Trump administration has actively courted for American resource investment. The preferential rate is not a gift; it is an entry ticket to deeper economic engagement, with expectations attached.
The article then maps Pakistan’s dual-axis great-power predicament. On one side, a decade of CPEC has anchored Pakistan’s growth strategy to China’s USD 62 billion Belt and Road initiative — Phase 1 delivered highways, Gwadar’s deep-water port, and numerous power plants; CPEC 2.0 has expanded into agriculture, IT, and renewable energy. Chinese loans denominated in hard currency fund these projects, and repayments create structural dependence. On the other side, foreign reserves that sank below USD 4 billion in mid-2023 have recovered to approximately USD 19.5 billion by August 2025 (SBP holding USD 14.24 billion), a stabilisation achieved through two IMF programmes, a flexible exchange-rate regime, and progress in tax administration. Washington’s tariff reprieve is explicitly framed as an attempt to blunt China’s influence — offering Pakistan market access in exchange for resource-sector openings and regulatory clarity for American investors. Pakistan must reassure Beijing that American partnerships are complementary rather than adversarial, possibly through tripartite ventures.
The article’s economic argument is clear-eyed about both the opportunity and its conditionality. Textiles and basic agriculture still dominate Pakistan’s export structure, leaving it exposed to cyclical shocks; any tariff relief preserves livelihoods across Punjab’s ginning factories and Sindh’s mango farms, but the concession comes with an unmistakeable message: diversify and open the resource sector. More fundamentally, a preferential tariff only has value if it buys time for structural reform — broadening the tax net, ensuring transparent natural resource management, and investing in education and technology to move beyond low-value commodities. Strategic hedging between Washington and Beijing is a viable posture; sitting on the fence is not. The article closes with the defining question: whether Pakistan can use this breathing space to build a resilient, diversified economy that no longer lives at the mercy of external bailouts — or whether today’s preferential rate will fade like so many past diplomatic achievements.