Pakistan heads to Washington for trade talks: What’s at stake as US tariff threat looms?

Pakistan is sending a delegation to the United States next week for high-stakes trade talks, President Donald Trump confirmed on Friday, as the South Asian nation tries to avert a looming tariff crisis that could jeopardise billions in export earnings, according to Reuters.

The development comes amid Washington’s broader tariff campaign against countries running significant trade surpluses with the US and follows a sharp warning from Trump over recent military clashes between Pakistan and its neighbour India.

Why Pakistan is under pressure

As per Reuters, the US government last month announced sweeping tariff hikes on multiple trading partners. Among them, Pakistan now faces potential tariffs of up to 29 per cent on its exports to the US, owing to a trade surplus of approximately $3 billion.

This makes the upcoming trade negotiations critical for Islamabad, which heavily relies on US market access to sustain key sectors such as textiles and surgical instruments.

Trump, speaking at Joint Base Andrews, said that “Representatives from Pakistan are coming to the United States next week as they seek to make a deal on tariffs,” as quoted by Reuters.

While he did not elaborate on the scope of discussions, his remarks signal that the talks will centre on tariff exemptions and possibly a broader bilateral trade reset.

A fragile moment for regional diplomacy

The talks also come against the backdrop of heightened military tensions in South Asia.

Earlier in May, Pakistan and India engaged in four days of intense cross-border conflict involving missiles, drones, artillery, and fighter jets, worst confrontation in decades.

Referring to this, Trump added, “I would have no interest in making a deal with Pakistan or India if they were to engage in war with each other,” as quoted by Reuters.

The White House is closely monitoring the situation, given the nuclear capabilities of both nations and their strategic importance in regional stability.

US-Pakistan trade dependency

According to 2024 trade data from the Office of the United States Trade Representative (USTR), total two-way goods trade between the US and Pakistan stood at $12.2 billion, with Pakistan exporting $7.6 billion worth of goods to the US and importing $4.6 billion in return.

Pakistan’s largest exports to the US include:

• Textiles and apparel: over $4.4 billion
• Surgical and medical instruments: around $500 million
• Leather goods and footwear
• Sporting equipment

The US is Pakistan’s single largest export destination, accounting for over 21 per cent of its total exports, according to data from Pakistan’s Ministry of Commerce.

By contrast, US exports to Pakistan remain limited, concentrated mainly in machinery, pharmaceuticals, aircraft parts, and agricultural products.

This asymmetry gives the US considerable leverage in trade negotiations but also highlights Pakistan’s economic vulnerability if tariff hikes are implemented.

Will Pakistan offer concessions?

As per Bloomberg, Pakistan may offer market access guarantees and investment incentives to US firms as part of the deal, particularly in sectors such as agriculture, green energy, and e-commerce.

Pakistan’s Board of Investment is reportedly finalising a list of federal infrastructure contracts and public-private partnerships worth over $25 billion, which could be opened up to US bidders in exchange for tariff relief.

The talks are expected to include Pakistan’s caretaker Commerce Minister and key officials from its Finance and Foreign Affairs Ministries, according to government sources quoted by The Express Tribune.

US Parallel talks with India complicate the picture

While Pakistan prepares for negotiations, India is also deepening trade engagement with Washington. Trump confirmed on Friday that the US is “very close [to] making a deal with India,” as quoted by Reuters.

India’s Trade Minister Piyush Goyal was in Washington earlier this month to advance discussions, with an interim trade agreement expected by early July, as per Reuters.

India currently faces 26 per cent tariffs on US-bound goods under the April tariff hike and is reportedly offering $50 billion in procurement opportunities to American firms in return for relief and improved access to the US tech and defence markets.

This parallel track may influence how Washington negotiates with Islamabad, potentially demanding more structural reforms or commercial openness.

What happens next?

For Pakistan, the stakes are high. Without a deal, its key exports could become uncompetitive overnight, triggering factory closures and job losses in industries that employ millions of workers, particularly in cities like Karachi, Sialkot, and Faisalabad.

The US also risks weakening a strategically important partner in South Asia, one it often relies on for counterterrorism, Afghan stability, and regional intelligence cooperation.

Trade officials from both countries are expected to meet in Washington next week, with preparatory talks already underway, according to sources quoted by Dawn