In the summer of 2025, as Donald Trump rewrote the rules of global trade once again, tariffs were no longer just economic tools – they became weapons in a war for geopolitical dominance, domestic optics, and industrial revival. His newly enacted tariff blitz, targeting dozens of nations with levies ranging from 10% to 50%, marked a historical shift not seen since the 1930s. But while the world reacts to America’s tariff walls, a quieter tragedy unfolds in Pakistan – a country with low tariff access but production shackles so tight, it can’t run the race it’s already qualified for.
When the United States announced sweeping tariff revisions in August 2025, the policy was spun with nationalist fervour. Trump’s campaign trail rhetoric had laid the groundwork: bring back manufacturing, punish economic rivals, and shrink the trade deficit. The implementation, however, goes beyond bravado. With new tariffs on goods from China, India, Brazil, South Korea, and even close allies like Canada and the UK, average U.S. tariffs now stand at 18.3% – the highest in nearly a century. The sheer scale and scope of this policy could reshape the global trade map.
Trump’s campaign trail rhetoric had laid the groundwork: bring back manufacturing, punish economic rivals, and shrink the trade deficit.
Specific sectors were hit particularly hard. Semiconductors – already a flashpoint in U.S.-China tensions – now face a 100% import duty. Pharmaceuticals and machinery are also being taxed steeply unless sourced from American soil or friendly supply chains. Brazil saw a 50% tariff imposed, Canada 35%, India 25-50%, and the European Union 15%. Even the UK was not spared, with a blanket 10% tariff applied. Trump called this the “Liberation Day” for American industry. But the economic data tells a more sobering story.
Despite short-term political gains, America’s own economy is beginning to crack. In July alone, job creation dipped to just 73,000 – down from an average of over 180,000 earlier in the year. The S&P 500 tumbled 1.6%, the Nasdaq lost 2.2%, and volatility indicators soared. Analysts from the Wharton Budget Model estimate these tariffs will cost the average American household nearly $2,400 annually in higher prices. Inflationary pressure is rising, with consumer goods becoming more expensive and certain manufacturing sectors already losing competitiveness.
While the fiscal allure of tariffs – bringing in nearly $400 billion in customs revenue annually – remains attractive to budget hawks, economists warn of hidden costs. General equilibrium models predict a 0.8% fall in U.S. GDP over the medium term. Household incomes, according to projections, could fall by as much as 5%, and middle-class lifetime earnings may shrink by $22,000. That’s the real price of protectionism.
Yet for countries like Pakistan, the issue isn’t just about how high America’s walls are – it’s about how poorly prepared they are to climb even when the ladder is extended. Pakistan has, paradoxically, found itself on the “favored” list in Trump’s tariff reshuffling. The U.S. has capped tariffs on Pakistani exports at 19%, giving it a rare edge over regional competitors. India is facing tariffs of 50%, Bangladesh and Vietnam hover near 20%, while Sri Lanka’s exporters are blocked out almost entirely. In theory, Pakistan should be thriving under this setup, especially with textiles – its largest export sector – having the runway to expand into the lucrative U.S. market.
But here’s the tragedy: Pakistan’s domestic production environment is so crippled by cost inefficiencies, energy hurdles, and systemic mismanagement that even favourable trade terms don’t translate into competitive exports. The problem isn’t in Washington’s policies. It’s in Pakistan’s factories.
The textile sector is the backbone of Pakistan’s economy, contributing around 8.5% to GDP, generating nearly 54% of export earnings, and employing over 25 million people directly or indirectly. But despite this central role, the industry is in a deepening crisis – not due to demand, but due to the cost of producing supply.
Start with energy. Pakistani manufacturers are paying approximately 17.5 cents per kilowatt-hour for electricity – double that of competitors like Vietnam (7.2 cents), Bangladesh (8.6 cents), and even India (10.3 cents). Gas prices are similarly uncompetitive, hovering around $15 per MMBtu, while regional rivals offer energy at less than half this rate. With energy being the second-highest cost component in textile production after cotton, this disparity alone erodes Pakistan’s entire export edge.
Then there’s finance. With interest rates ranging between 17% 22% over the past 12 months and access to Export Finance Schemes becoming increasingly bureaucratic and politically driven, textile exporters are struggling to keep their working capital cycles afloat. LCs are delayed, input procurement is inconsistent, and liquidity is often stuck in customs or refund pipelines. Even sectors that are supposedly zero-rated for sales tax face procedural hurdles that act as a de facto tax.
Pakistan’s logistics and infrastructure challenges add another layer of inefficiency. Port charges are higher than Dubai or Colombo, highway transportation is fragmented and costly, and delays in customs clearance can stretch to weeks. Inland freight costs per kilometre are 25-35% higher than regional benchmarks. The end result? The landed cost of a Pakistani shirt in a U.S. port is often 10-12% higher than a comparable shirt from Bangladesh – despite Pakistan’s lower tariffs.
In such a climate, the tariff concession becomes symbolic – a technical advantage rendered meaningless by structural weakness. Pakistan has, in effect, won the trade lottery and thrown away the ticket.
Global data reinforces this point. Despite the improved market access, Pakistan’s share in global textile exports has remained stagnant – hovering around 1.8% – while Vietnam has grown from 2% to over 5% in just eight years. Even Bangladesh, once on par with Pakistan, now commands nearly 7.2% of the global market, largely due to better energy policies, government-industry coordination, and consistent export facilitation.
The tragedy is amplified by the fact that Pakistan has a historically high Revealed Comparative Advantage (RCA) in textiles. This means the country is naturally suited to producing and exporting these goods. Yet, that advantage is wasted when production becomes too expensive and logistics too chaotic to deliver on time and on cost.
The government, for its part, has made efforts – energy relief packages, export incentives, and attempts to open new markets in Africa and Central Asia. But these have been largely reactive and inconsistent. What Pakistan needs is not band-aids but surgery. Structural reforms in energy pricing, digitised tax refunds, investment in rail freight corridors, rationalisation of port fees, and predictable financial access are essential if it is to convert favourable tariffs into export growth.
More crucially, industrial zones need to function as real cost-effective clusters – with shared services, power generation, and port-link infrastructure – not just land allotments for speculation. Without such transformation, Pakistan’s dream of becoming the next Vietnam will remain just that – a dream.
Meanwhile, in the U.S., the true cost of Trump’s trade policy may take years to fully surface. The short-term gains – higher customs revenue, nationalist sentiment, protectionist appeal – may mask deeper economic wounds. American companies relying on global inputs are already relocating or reshuffling supply chains. The auto, machinery, tech, and agriculture sectors face rising input costs, lost market share, and disrupted relationships with long-standing trade partners. Inflation remains stubborn, GDP forecasts are down, and the job recovery is stalling.
Tariffs may deliver headlines, but not long-term prosperity.
Both countries – the U.S. and Pakistan – are playing dangerous games with their trade architecture. One is building walls in the name of economic nationalism, risking its own consumer base and global leadership. The other is failing to walk through an open gate, trapped by internal inefficiencies, broken policy plumbing, and cost structures that defy logic.
It is often said in diplomacy that “access is meaningless without ability.” Pakistan has access. The U.S. has the ability. But neither is using them wisely. If this continues, the world will watch two nations – one a superpower, the other a struggling exporter – sabotage their own positions in a global economy that is neither forgiving nor patient.
The lesson is clear. In the race of global trade, it’s not just about who has the entry ticket. It’s about who can actually run.
The writer is a financial expert and can be reached at jawadsaleem.1982@ gmail.com. He tweets @JawadSaleem1982