U.S. reduces tariff for Pakistan to 19% after talks

August 01, 2025 (MLN): In a diplomatic win for Pakistan, the United States has reduced the reciprocal tariff rate on Pakistani goods from a previously proposed 29% to 19%, following direct negotiations between the Pakistani government and President Donald Trump’s administration.

The revised rate, announced through a new Executive Order issued on July 31, 2025, came as part of Washington’s broader effort to rectify what it terms “unfair trade practices” and protect U.S. economic and national security interests.

Pakistan is one of 69 countries subjected to new or adjusted duties under the modified reciprocal tariff regime, which sets rates between 10% and 41% depending on trade alignment and strategic cooperation with the United States.

Initially, Pakistan was expected to face a stiff 29% tariff under the early draft of the policy announced in April this year.

However, after weeks of backchannel discussions, Pakistani officials successfully persuaded the U.S. administration to revise the rate down to 19%, aligning it with regional peers such as the Philippines, Indonesia, Malaysia, and Thailand.

Pakistan’s key export industries, including textiles, leather goods, surgical instruments, and food products, will bear the brunt of the 19% tariff when exporting to the U.S., one of Pakistan’s largest export markets.

In FY24, Pakistan shipped goods worth over $5 billion to the U.S., with textiles alone accounting for more than 60% of the total.

Although the reduction from 29% is a relief, the new 19% duty still threatens to erode Pakistan’s competitive edge in the American market, where it competes closely with regional players like Vietnam and Bangladesh, who themselves now face tariffs ranging from 19% to 20%.

President Trump’s executive order modifies the Harmonized Tariff Schedule of the United States (HTSUS), recalibrating duty rates for dozens of nations. Countries that have not aligned with U.S. trade or national security goals, or failed to conclude meaningful trade agreements, are now facing higher reciprocal tariffs.

Select highlights from the tariff matrix include:

• India, Kazakhstan, Moldova: 25%

• Vietnam, Sri Lanka, Taiwan: 20%

• Malaysia, Pakistan, Indonesia, Philippines, Thailand: 19%

• Laos and Myanmar: 40%

• United Kingdom and Brazil: 10%

In contrast, the European Union received a nuanced treatment. Goods with pre-existing duty rates above 15% face no additional tariffs, while others are topped up to meet a minimum 15% threshold.

In an aggressive move to curb duty evasion, the order imposes a 40% tariff on transshipped goods—items routed through third countries to avoid tariffs. These shipments will also face fines, penalties, and other legal action.

Moreover, the U.S. Customs and Border Protection (CBP) will publish a biannual list of facilities and countries involved in transhipment to guide public procurement and commercial due diligence.

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