Finance Minister Muhammad Aurangzeb has categorically stated that Pakistan has no intention of retaliating against the 29 percent tariffs imposed by the United States. A study conducted by Pakistan Institute for Development Economics (PIDE) titled “Impact of Unilateral Tariff Increase by the US on Pakistani Exports” noted that the tariffs would actually amount to 37.6 percent when added to the existing 8.6 percent Most Favoured Nation status granted to Pakistan with a devastating impact on our exports - 1.1 to 1.4 billion-dollar lower exports (mainly textiles) revenue.“ Aurangzeb during a recent interview acknowledged that Pakistan is concerned about the US tariffs but added that “we all need to think about how to move forward in this new world order, and I believe it is essential to engage in dialogue on this matter.” A few days later, a Business Recorder exclusive sourced to the Ministry of Commerce maintained that “we are in contact with the Trump administration through the Pakistan Embassy in Washington regarding the issue of increased tariffs. Efforts are underway to initiate formal talks at the government level. An official delegation led by the Commerce Secretary will depart for Washington once meetings are scheduled.“ And this week past it was reported that Aurangzeb will attend the Spring meeting of the IMF/World Bank in Washington, DC (21 to 26 April) and engage with relevant US officials on this matter. Three obvious observations need to be highlighted. First, the US reasons for levying tariffs on Pakistan relate mainly to two ministries – Federal Board of Revenue (FBR) that comes under the administrative control of the Finance Ministry led by Aurangzeb and the Interior Ministry led by Mohsin Naqvi. FBR related concerns identified by the US are fourfold: (i) Trade and Investment Framework Agreement (TIFA) signed in June 2003 between Pakistan and the US, the primary mechanism for discussions of trade and investment as per the US, agreed on an average MFN status applied tariff of 10.3 percent. This is not applicable as Pakistan has bound 98.6 percent of its tariff lines to the World Trade Organization (WTO), with an average WTO bound tariff rate of 60.8 percent; and in spite of tariff reductions since 2013 US companies maintain that Pakistan is imposing high tariff rates and in some cases additional duties on products such as automobiles and finished goods (import controls due to inadequate foreign exchange reserves); (ii) issuance of statutory regulatory order (SRO) dated 11 July, 2024 - SRO 1021 (banning wheat import); (iii) non-tariff barriers which account for US exporters adversely affected by customs rules 389 (requiring physical invoice of packing list in the shipping container) and 391 (placing responsibility of including such documents and liability for failure to comply on owner of goods and carrier); and (iv) in October 2022 Pakistan customs detained two shipments of US genetically engineered soya beans that required import license for GE products, a process that the US administration alleges was stymied by lack of implementing regulations for approval of GE soybeans for food, feed, and processing. The resolution of (ii) to (iv) will be a matter of an administrative decision but (i) may require a foreign exchange reserves position that is not due entirely to roll-overs by friendly countries (at present 16 billion dollars are rollovers while on 11 April 2025 total reserves were 10.572.4 billion dollars). Interior Ministry concerns relate to what the USA argued is routine blocking access to internet services for hosting content deemed to be blasphemous or immoral, or on grounds that such services can be used to “undermine national security.” Under the Prevention of Electronic Crimes Act (PECA), Pakistan routinely blocks entire social media platforms or demands that sites geo-block posts considered “unlawful online content.” An e-Safety Bill and the pending establishment of a Digital Rights Protection Authority and National Center for Cyber Investigations would increase financial and criminal penalties associated with online speech. These concerns too can be dealt with, concerns that have also been voiced by Pakistanis engaged in online business. Second, Pakistan is too small a player for the US, with a mere 5.540 billion-dollar bilateral trade in the first nine months of the current year - 4.345 billion dollars in our exports and the remaining 1.195 billion dollars in imports from the US. In contrast, only in February this year, the US imported goods worth a total of 402.1 billion dollars and exported 181.9 billion dollars. While a transactional relationship with the US may, some argue, have allowed the US to exempt Pakistan from tariffs, yet that is not a valid hypothesis today. Trump publicly refused to lift the 17 percent tariffs on goods from Israel, a country that it continues to enjoy an extraordinary relationship with the US. His response, “don’t forget we help Israel a lot, we give Israel billions of dollars a year. It’s one of the highest of anyone.” Quick to back down given Trump’s obduracy on this matter Netanyahu, implacable on matters relating to the peace and the Palestinians, quickly acquiesced pledging that Israel would eliminate all trade barriers with the US, adding that Israel can serve as a model for other countries that strive to do the same. And finally, what has to be noted and considered by the stakeholders is the response of US allies and foes to Trump tariffs and take account of the slow though inexorable emergence of a new international world order, which has upended not only unipolar global power politics but also existing trade rules by focusing on fair as opposed to free trade, ironically a plea previously made by developing countries like Pakistan. The old regulations with respect to trade are operated by the WTO established in 1995 with 166 members in 2024 and its primary functions include providing a forum for members to negotiate trade agreements and resolve disputes. China, Canada and the European Union’s response to Trump tariffs was to commence dispute settlement proceedings in the WTO, irrespective of the 90-day pause, however there are few who reckon this will be anything more than symbolic as on 28 March this year a report was published citing threetrade sources that the United States has paused its contributions to the WTO – a report that has not been denied by the US. WTO Director General slashed trade growth forecast as a consequence of the US China tariff war, adding that “I’m very concerned, the contraction in global merchandise trade growth is of big concern.” Chief Economist Ralph Ossa of the WTO in a blog dated 11 April 2025 argued in favour of sustaining what is by now considered the old trade rules, “as tariffs return to the trade policy agenda, it is worth recalling what economics has long understood: tariffs are not just a tool for raising revenue or protecting domestic industries – they are a policy lever with wide-ranging, and often unintended, consequences. Their appeal in the short term can obscure longer-term costs to inflation, competitiveness and international cooperation. In a world of growing trade tensions, a clear-eyed view of those trade-offs is more important than ever.“ Ossa did not mention the overuse of sanctions as a foreign policy tool by successive US administrations, and the weaponisation of the dollar that led to a significant strengthening of the focus of sanctioned nations on establishing an alternate source of payment. The consensus being that SWIFT will be abandoned as it is technically not that sophisticated and be replaced by digitisation of trade payments. Surprisingly, the IMF recently maintained that global economic growth is on course. Pakistan no doubt wisely does not want to take sides, even though China has emerged as the major long-term player in stabilizing our fragile economy and in investing massively in the country’s infrastructure development during the past decade. On the other hand, the US was one of a handful of countries with which Pakistan registered a trade surplus and at the same time it is also a major source of remittance inflows which are increasingly overtaking exports as a form of desired foreign exchange earnings. Multilateral support on which Pakistan is heavily reliant at present and which triggers support by the three friendly countries, including China, are led by the West and hence it is inconceivable that the administration is poised to take sides. But as aforementioned, the Shehbaz Sharif-led government can and must deal with US concerns if it wants to continue engaging in other economic areas with the US. Copyright Business Recorder, 2025