The recent move by the United States to impose a 50 percent tariff on a broad category of Indian exports has triggered a new debate in South Asia. The tariffs will apply to approximately two-thirds of Indian shipments to the U.S as of August 27, 2025, especially in labor-intensive industries, including textiles, apparel, gems, jewelry, shrimp, furniture, and carpets. The Global Trade Research Initiative (GTRI) estimates that goods valued at approximately $60.2 billion, approximately 66 percent of India's U.S-bound exports, are now imposed. Experts predicted that India may lose up to 70 percent of its export in the impacted industries, thus resulting in a total reduction of shipments to the American market by 43 percent. Ajay Srivastava, the founder of GTRI, has already warned that this tariff regime can affected the presence of India in the U.S. that has been established over time, while the equity markets and currency in India are already showing the sign of distress. The New Delhi government under the leadership of Prime Minister Narendra Modi has vowed to defend local industries with reforms such as streamlined system of Goods and Services Tax (GST). Nevertheless, such measures will not help to cushion the immediate blow.
In the case of Pakistan, this turmoil provides a rare opportunity. Despite the fact that the United States also imposed a 29% reciprocal tariff on some of the Pakistani exports, the competitive disadvantage that has been placed on the Indian goods is much greater. The actual opportunity is in textile and apparel industry which already constitutes approximately 75-80 percent of the Pakistani exports to the U.S. When Indian textiles are at a disadvantage of 30 to 31% in cost, Pakistani products become almost cost competitive in a short period. For example, A shirt would cost an American customer $16.40 when imported from India but in Pakistan the cost is much less. Although Bangladesh, Vietnam, and Mexico are also strategic countries that can get benefit, the history of the textile trade and the current infrastructure make Pakistan realistic to occupy a segment of the market share that India is likely to lose.
However, the success of Pakistan in capitalizing this shift is pegged on practical measures and not wishful thinking. Still Pakistan has to bear the effects of the tariff as compared to Bangladesh and Vietnam that enjoy the benefit of duty-free or preferential access to some western markets because of trade agreements. In order to compete, Islamabad need to invest in efficiency and also reducing the production cost within the country. Historically, the textile sector of Pakistan has been affected by power shortages, increased input costs, and regulatory bottlenecks. These problems can be solved by provision of stable energy supplies, favorable credit facilities and export friendly taxation policies, which would enable industries to increase capacity in the short term. Moreover, strict quality control and compliance with labor and environmental standards are also necessary as U.S consumers are becoming more conscious of ethical sourcing. These are practical and gradual steps that can assist Pakistan to gain credibility and acquire contracts in the competitive American market.
Diplomatic engagement also matters. The U.S action to sanction India was not solely economic in nature but also connected with the fact that New Delhi still traded with Russia even when the Western countries had imposed sanctions. This highlights the inextricability of trade and geopolitics. In the case of Pakistan, it will have to balance its relationship with Washington while not to jeopardize its relationship with China. Islamabad may utilize this opportunity as a real chance to emphasize its stance as a moderate and cooperative state within South Asia and as a nation willing to work with U.S on mutually beneficial economic initiatives. This kind of engagement would even open the door to preferential treatment or less tariffs on certain Pakistani products, but this would demand long-term diplomacy.
Nevertheless, Pakistan should be careful. The opportunity does not guarantee economic windfalls in the long term. Other competitors such as Bangladesh and Vietnam have better supply chains and well-established relationships with the Western markets. In order to stay competitive, Pakistan should not rest on its laurels and make sure that the export sector is capable of delivering higher demand without sacrificing quality. It should also resist the urge to consider this a long-term benefit. International trade is dynamic and the policies of Washington can change due to political or diplomatic events in future. Pakistan needs to use this as a stepping stone to intensify its exports, diversify other than textile sector and slowly develop resiliency to external shocks.
In conclusion, the U.S-India tariff clash is a turning point in regional trade although it is a blow to New Delhi and also it provides tangible but restricted opportunity to Islamabad. It is impossible for Pakistan to substitute India domination in the American market, but it can attain some segment of market with proper planning. Pakistan can convert this trade disruption into a small but significant economic benefit by enhancing the competitiveness of its industries, providing incentives to its exporters and conducting diplomatic talks with Washington. Khurram Mukhtar, patron-in-chief of the Pakistan Textile Exporters Association (PTEA) of Pakistan said that the Pakistan will remain competitive to the major countries that export textiles to the US even after the tariff adjustments due to its entire supply chain, quality standards and developed trade relations. The next few months will reveal whether Islamabad can be foresighted and able to transform geopolitical disruption into sustainable advantage or not.
