Pakistan Seeks Special Incentives for Key Export Sectors Amid US Tariff Hike

The Ministry of Commerce (MoC) of Pakistan has called for “special incentives” to support the export-oriented sectors affected by the United States’ recently imposed 19% ad-valorem tariffs. This call for assistance comes after President Donald Trump’s executive orders from April 2025, which imposed these tariffs on imports from all trading partners, including Pakistan.

Commerce Minister Jam Kamal Khan has appealed to Prime Minister Shehbaz Sharif for backing the materialization of these “handholding” incentives for Pakistan’s vulnerable sectors, especially after these new tariffs were announced in a bid to address the economic situation surrounding US-China trade tensions.

Key Developments in US-Pakistan Trade Relations

On April 2, 2025, President Trump declared a national emergency, resulting in the imposition of a 10% base ad-valorem tariff starting from April 5, 2025, and a subsequent range of tariffs between 10% and 50% that began on April 9, 2025. As a response, Pakistan’s Ministry of Commerce, led by the Finance Minister and Secretary of Commerce, undertook negotiations with the US government through multiple rounds of talks.

Thanks to these successful negotiations, Pakistan was able to reduce the initially imposed 29% tariff to 19%, a lower rate compared to regional competitors such as Bangladesh, Vietnam, and India. The move significantly positioned Pakistan in a more competitive light, with the United States subsequently imposing a 25% tariff on India on August 6, 2025, giving Pakistan an advantage.

Efforts to Boost Exports Amid Challenges

Despite these developments, industry representatives have emphasized the need for favorable and predictable policy support to maintain competitiveness in the global market, especially in the US. During a meeting on August 11, 2025, exporters from various sectors discussed the importance of reducing manufacturing costs and enhancing the business environment for exporters. To aid these industries, the Ministry of Commerce has submitted several key recommendations to the Prime Minister to support affected sectors:

• Finance Division: Authorization for the Ministry of Commerce to approve Rs. 12 billion in balance amounts for the clearance of DLTL claims.
• Federal Board of Revenue (FBR): Ensuring that future refunds are processed within 72 hours and reviewing the customs valuation of mango pulp in consultation with industry stakeholders.
• Power Division: Removal of cross-subsidies in industrial power tariffs.
• Petroleum Division: Addressing arrears in RLNG bills and rationalizing RLNG tariffs to reduce disparities.
• Maritime Affairs Division: Reducing shipping time to the United States from 48 days to 24 days.
• Commerce Ministry: Announcing new Drawback of Local Taxes and Levies (DLTL) incentive schemes to boost exports.

The Ministry of Commerce’s proposals highlight the urgent need for financial and policy support to ensure Pakistan’s export sectors remain competitive and resilient against rising global trade barriers.

Conclusion

With the US imposing higher tariffs on imports, particularly targeting Chinese goods, Pakistan’s trade policy and export sectors face significant challenges. However, through concerted efforts and strategic negotiations, Pakistan has managed to mitigate some of the damage. Moving forward, the government’s response to these proposed incentives will be crucial in safeguarding the future of Pakistan’s export-driven economy.

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