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[Complete details of tariffs between US and China]
Haroon Sharif //DAWN: April 12, 2025
FINALLY, it is happening through the US president’s executive orders — closure of USAID, the start of a tariff war to balance the trade deficit, challenging of trade liberalisation and breaking away from global value chains.
The US has managed to disrupt global markets by unilaterally altering the terms of trade in the name of reciprocity for the world’s largest consumer market.
In disrespect to the governing rules of the WTO and internal Congressional processes, this executive order is based on a so-called economic emergency in the US. It has not only signalled an uncertain future for economic engagement but has also announced the beginning of an era of popular protectionism.
At the end of the day, it seems all about curtailing China, opening up spaces for US companies in the global marketplace and balancing US trade deficit. Evidence suggests, though, that protection through tariffs does not lead to achieving medium-term goals of investment, competitiveness and job creation.
Various economies are left with no choice but to come up with a short-term response to adjust to the new ways of engagement with the US administration. The top five suppliers of US imports in 2022 were: China ($536.3 billion), Mexico ($454.8bn), Canada ($436.6bn), Japan ($148.1bn), and Germany ($146.6bn), while Vietnam, India, Bangladesh and Pakistan exported $120bn, 90bn, 8.3bn and 5.2bn respectively to the US.
So, the higher tariffs could be a massive downward impact on the GDP of economies that largely depend on their exports to the US, and global financial markets are negatively responding to this development. From the other side, the top five purchasers of US goods in 2022 included Canada ($356.5bn), Mexico ($324.3bn), China ($150.4bn), Japan ($80.2bn), and the UK ($76.2bn).
The China factor remains one of the key driving forces behind this US presidential order. China, the country the US has its largest trade deficit with, has been hit with the highest 125 per cent tariff, prompting Beijing to respond with similar countermeasures. The escalation has marked the beginning of a new global trade war between the world’s two largest economies.
The total US-China bilateral trade in goods was $582bn in 2024, down from $661.5bn in 2018 — the US share of Chinese exports dropped from 19.2pc to 14.7pc. The general perception is that China will emerge as a winner in the medium term due to its dominance in technology and market diversification under the Belt & Road Initiative.
The other major change for developing countries is the closure of USAID. Historically, bilateral aid, multilateral loans and market access have remained visible foreign policy tools for fostering economic diplomacy and geopolitical influencing. Since World War II, the model of delivering aid and concessional loans have undergone several adjustments — from building infrastructure to military aid and from food and medicines to building climate resilience.
The real shock hit the so-called international development sector when on the day of his inauguration, President Trump issued an executive order for “re-evaluating and realigning United States foreign aid” that said the US “foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values” and that they “serve to destabilise world peace”.
Since that order, which froze almost $72bn of US foreign development assistance, the Trump administration has moved to shut down the 65-year-old USAID. While foreign aid has always been aligned with the political priorities of donor countries, it has also helped poor countries deal with natural disasters, displaced populations due to conflicts and other economic shocks like Covid-19.
The US began providing economic assistance and military aid to Pakistan shortly after the latter’s creation in 1947. In total, the US obligated nearly $67bn (in constant 2011 dollars) to Pakistan between 1951 and 2011. In 2009, in an attempt to signal America’s renewed commitment to Pakistan, the US Congress approved the Enhanced Partnership for Pakistan Act (aka Kerry-Lugar-Berman bill).
KLB’s intention was to put security and development on two separate tracks. The Act authorised a tripling of US economic and development-related assistance to Pakistan, or $7.5bn over five years (FY2010 to FY2014) to improve Pakistan’s governance, support its economic growth, and invest in its people. Between FY2002 and FY2009, only 30pc of US foreign assistance to Pakistan was appropriated for economic-related needs; the remaining was allocated to security-related assistance.
For the past three decades, Pakistan has failed to bring a change to the structure of its economy which remains largely dependent on non-exportable services. Under the emerging scenario of US-Pakistan trade, our exports are expected to take a hit due to a potential dip in consumer demand in the US. The opportunity arising from the pressures on our competitors is unlikely to materialise in the short term as the investment climate remains unfavourable for the expansion of export-led industry, knowledge products or relocation of industry from China and East Asia.
The best Pakistan can do in the short term is to control the potential damage through trade and strategic diplomacy with the US. Pakistan’s trade deficit with China is huge and the US may ask for shifting some imports towards itself under the argument of reciprocity. This will lead to making some difficult choices as maintaining a balance between relations with the US and China will get more difficult. It is yet to be seen if China will consider giving more market access to Pakistan to make up the potential trade losses with the US.
For Pakistan, transitioning from using geopolitics and diplomacy as tools for economic gains in the shape of aid, market access or investment is inevitable. There is an urgent need to develop an economic value proposition based on the competitiveness and diversification of the economy. This can only be done if institutional changes are carried out to delegate economic transactions to the private sector.
The current uncertainties might open up space for trade with India and other regional countries. Pakistan’s failure to leverage the connectivity infrastructure needs to be revisited under the tariff war. There are a number of markets in East Asia, Southeast Asia and the Middle East that will be looking for diversification from the US and China.
Can Pakistan offer an attractive economic value proposition to partner with these countries? At the end of the day, Trump’s tariffs have only served to accelerate moves to a new global economic order that will shape the contours of future globalisation and global politics.
The writer is a development policy thought leader and former investment minister.
Published in Dawn, April 12th, 2025
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Rafia Zakaria // DAWN April 12, 2025
IT was a week of turnarounds. The Trump White House, eager to remain on the warpath with the rest of the world, came down with ridiculous and enormous tariffs for other countries. On April 2, 2025, President Donald Trump imposed a universal tariff on most nations, sending the US stock market into a tailspin, with trillions of dollars wiped out within days. For his part, President Donald Trump acted nonchalant and went off to play golf with the visiting Saudis. Then on April 9, even more draconian reciprocal tariffs were imposed on another slew of countries — allegedly based on a formula that assessed trade deficits and existing tariffs on American goods. Amid the mess, Trump officials advised targeted countries not to retaliate.
China, however, did not listen. After the April 2 tariffs, it decided to retaliate with an 84 per cent tariff on US goods, hiked later to 125pc in response to a further increase by Trump. Unsurprisingly, this turmoil rattled investors everywhere, and nearly all markets took a hit. Economists and analysts began sounding the alarm about a global recession. The White House’s belligerence didn’t suggest that the president — who is using emergency powers to enact these tariffs — was about to capitulate.
It might have gone on — had the US bond market, one of the world’s safest and most stable investments, not suddenly started to tank. The bond market — essentially the channel through which countries buy US debt in 10- and 30-year increments — reflects global confidence in America’s ability to repay its dues. That confidence has traditionally remained high, given the size and strength of the US economy. Unlike stocks, which are known for their volatility, the bond market is supposed to be steady. But not this time.
The sudden volatility there is likely what forced Trump’s hand, when he recently announced a 90-day pause in tariffs on all countries — except China. Stock markets around the world exhaled. The NASDAQ posted its biggest single-day gain since 2008. China, however, now faces 125pc tariffs.
The world’s two strongest economies have locked horns — and this will affect everyone, including Pakistan. While Pakistan was among the countries hit with a 29pc tariff (now paused for 90 days), the current situation may present an opening. One of the things the US is pursuing is to negotiate entirely new trade agreements with the rest of the world. The tariffs, in this sense, are a strange sort of invitation to close a ‘deal’ with the Trump administration. Countries that do so may find themselves in a better position than those that don’t. All they need is to propose something the Trump team can spin as a win.
The countries that dominated in the pre-Trump 2.0 world are no longer favourites. The US turn away from China and, to some extent, India means it will need to rely on smaller suppliers to fill the gaps left behind. The aim is to decimate China’s monopoly by diversifying who gets access to the US consumer market. Pakistan could play a role in this diversification. It cannot replace China or India, but may be able to find niche areas that serve unmet demand in the US.
This task would have been easier had the US objectives around these tariffs been clearer. Take the case of Vietnam, slammed with a 45pc tariff before the 90-day pause. Exports to the US make up nearly a quarter of Vietnam’s GDP, so it was no surprise the latter country quickly arrived at the negotiating table. The Trump administration’s response was unexpected. Trump adviser Peter Navarro dismissed Vietnam’s 0pc tariff offer as “not enough”. The reason? Navarro accused Vietnam of “non-tariff cheating” — routing Chinese goods through its ports to bypass US restrictions. The message was blunt: Vietnam must choose between the US and China. In Trump’s world, there is no room for divided loyalties. Vietnam, it seems, has made its choice. Reports now suggest the country has agreed to purchase expensive defence equipment — including warplanes — to help reduce the trade deficit and show goodwill.
Adept diplomats negotiating on Pakistan’s behalf could learn a lot from this. Pakistan desperately needs better trade agreements to lift itself out of economic stagnation and reduce its dependence on IMF lifelines. The country has the capacity to supply textile-based goods to the US consumer market — and with China out of the picture those products could fare better if Pakistan secures more favourable trade terms.
China’s loss could be Pakistan’s gain — if Pakistan is bold enough to seize the moment and clinch a deal with the Trump administration that can be packaged as a win. For a country that has waited a long time for an opportunity, this might be one.
The writer is an attorney teaching constitutional law and political philosophy.
rafia.zakaria@gmail.com
Published in Dawn, April 12th, 2025
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DAWN EDITORIAL: 12 April, 2025
A CONCLAVE of local divines that had gathered in Islamabad on Thursday have made two important points: firstly, that all protests and boycotts in support of the besieged Palestinians should remain peaceful, and secondly, that the Muslim world should take collective action to stop the genocide in Gaza. Mufti Taqi Usmani observed that “do protest and boycott, but peacefully”. This message is important because over the past few days, mobs have attacked several Western fast-food outlets in Lahore as well as Karachi and other Sindh towns, apparently due to the perception that these brands ‘support’ Israel. However, vandalism is not the way to express solidarity with Palestine. It is a fact that many MNCs — including Big Tech firms — have financially and otherwise supported Israel. But violent attacks on foreign brands in Pakistan will hardly end the genocide. Instead, a more intelligent way for those looking to stand with Palestine would be to follow the guidelines of the Boycott, Divestment and Sanctions movement. Rather than randomly boycotting firms believed to be aiding Israel, BDS targets those companies with “a record of complicity in Israeli apartheid”. This can include firms involved in illegal Israeli settlements, or those that have made donations to Tel Aviv’s military. The boycott of apartheid South Africa worked, and conscientious people worldwide should also shun Israel and its allies until the genocide in the occupied territories is permanently halted.
As for the other point made by the clerics, sadly, the Muslim world has done very little of substance to stop the massacre in Gaza, allowing Israel to ramp up its campaign of extermination in the Strip, and also attacking Syria and Lebanon. Calls for unity are important, but the Muslim world is characterised by intense internal division, and the lack of a cohesive policy to stop the war on the Palestinian people. The sad fact is that Muslim-majority countries have been unable to leverage their collective economic and political clout. Other than making sympathetic statements, the OIC has not been able to enforce a trade blockade against Israel, while Muslim states that have diplomatic relations with Tel Aviv have not felt it necessary to break off ties until the bloodshed in Gaza stops. Israel knows how weak and divided the Muslim world is, hence it sees no reason to stop the murder.
Published in Dawn, April 12th, 2025
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DAWN EDITORIAL: 12 April 2025
WESTERN countries have been quite cruel to the Afghan people. Not only did they lay waste to the latter’s homeland over a war that ultimately went nowhere, but they are also failing to take responsibility for the lives they placed at risk during the process of attempting to ‘rebuild’ Afghanistan.
This, of course, is a reference to the many Afghans awaiting their promised repatriation to various Western countries. They have been stranded for years in Pakistan because states that once promised them asylum in recognition of their sacrifices and contributions have been taking their sweet time processing their visa applications.
These refugees face certain risks to their lives and liberty if they return to Afghanistan: their past work for various Western governments and organisations has seen them branded as ‘traitors’ in their country. Those risks have increased considerably of late, as Pakistan has adopted a ‘no concessions’ policy towards Afghan nationals.
It is deeply disappointing that the countries responsible for these refugees’ plight have not shown more urgency in addressing their condition. One wonders if there is any concern about the message being sent by their complacency. They seem to be telling the Afghan people that, no matter where they stood during the so-called war on terror, they were, ultimately, dispensable to Western nations.
One wonders what the Afghans make of their situation: after all, the forces that went into Afghanistan presented themselves as more ‘moral’, more ‘civilised’ and more concerned with ‘human rights’ than the ‘barbarians’ they meant to defeat. Once their long campaign fizzled out though, it seemed only those Afghans who had kept their distance, or those who sided with the ‘enemy’, were the ones who came out on top. The rest had to flee for their lives and seek the charity of other nations.
The countries who pledged their support to them must do better. Pakistan has already made it clear that it is no longer hospitable to Afghan nationals. Though Islamabad must show more flexibility towards refugees who face risks to life and liberty in case of deportation, the other nations responsible for their well-being should also be pushed to step up and expedite their repatriation.
The Afghan people cannot be treated like a football that is kicked around while nations bicker over visa protocols and policies. They deserve safety, stability and a chance to rebuild their lives.
It is both unfair and dangerous that the Afghan people’s immediate well-being has been left entirely to Pakistan to consider, while other nations have been taking years figuring out whether or not they will do right by those whom they promised safety and security. Whatever their concerns, they can be addressed once these refugees are relocated to less hostile locations.
Published in Dawn, April 12th, 2025
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