When U.S. President Donald Trump revived his protectionist instincts in 2025, few economies were spared. His “Liberation Day” executive order set baseline import duties well above pre‑2025 levels and threatened penalties of up to 50 %. Some small states that had been staring down 50 % duties, such as Lesotho, eventually landed at 15 %. Others, including Taiwan, were assigned 20 %. Pakistan, to the surprise of many observers, walked away with a negotiated 19 % tariff on its exports.

Pakistan negotiated a 19% tariff, far below the punitive rates imposed on others.

That number is far lower than the punitive rates some U.S. partners face, and it hints at a complex diplomatic dance taking place behind the scenes. Navigate At first glance, a 19 % duty doesn’t look like a victory. Pakistan’s exporters have long enjoyed near‑zero tariffs under various preference schemes and raising duties to almost one‑fifth of the value of shipments will still bite into margins. But in the context of Trump’s tariff matrix, where several countries must swallow rates in the high‑30 % or even 50 % range, Islamabad’s deal feels more like a lifeline than a punishment.

Why would Washington give Pakistan an easier ride? Part of the answer lies in strategic leverage. Pakistan sits astride the Arabian Sea, controls overland routes into Afghanistan and Central Asia, and boasts untapped mineral and energy deposits. Trump’s team has openly courted foreign resource deals, and Balochistan’s copper and gas fields are an obvious lure.

The administration also sees tariffs as an instrument of geopolitics. Countries that align with U.S. security priorities, or that promise investment opportunities for American firms, end up paying less. In this reading, Pakistan’s reduced duty isn’t a gift; it’s an entry ticket to deeper economic engagement with Washington, with expectations attached.

A look at Pakistan’s trade structure underscores why this matters. Textiles and basic agriculture still account for most exports, leaving the country exposed to cyclical shocks. Any respite in duties preserves livelihoods in Punjab’s ginning factories and Sindh’s mango farms. But the concession comes with a clear message: diversify and open up your resource sector if you want continued access.

Tariffs are only part of the story. Over the past decade, Pakistan has anchored its growth strategy to the China‑Pakistan Economic Corridor (CPEC). Launched in 2015, the $62 billion initiative connects the ports of Gwadar and Karachi to China’s western Xinjiang region. In its first phase, CPEC poured money into highways, the deep‑water port at Gwadar and numerous power plants. Phase 2, known as CPEC 2.0, has expanded into agriculture, information technology and renewable energy, promising millions of jobs and a more diversified economic base.

Washington expects reciprocal investment opportunities, especially in resources.

Beijing’s model, however, comes with its expectations. Chinese loans largely fund CPEC projects, and repayments are denominated in hard currency. The corridor also gives China a strategic outlet to the Arabian Sea. Trump’s administration has made no secret of its desire to blunt China’s influence. By offering Pakistan a modest tariff rate, Washington hopes to tempt Islamabad away from an exclusive reliance on Beijing. Yet China remains Pakistan’s largest bilateral creditor and its primary supplier of critical infrastructure. Turning away from CPEC now would jeopardize power plants, road networks and the broader Belt and Road linkage.

Pakistan’s macroeconomic numbers present a mixed picture. On the one hand, the country has stabilised its external accounts. Foreign reserves, which sank below $4 billion in mid‑2023, climbed to roughly $19.5 billion by early August 2025. The State Bank of Pakistan (SBP) now holds about $14.24 billion, with another $5.25 billion residing in commercial banks. The improvement reflects two IMF programmes, a more flexible exchange‑rate regime and some progress in tax administration. The breathing space has allowed Islamabad to stabilise the currency and pay for essential imports without resorting to ad‑hoc restrictions.

On the other hand, the domestic economy remains fragile. Poverty and inequality are still pervasive, revenue collection is chronically weak, and energy shortages flare up each summer. Reforms to broaden the tax base, rationalise energy subsidies and professionalise public enterprises have been announced repeatedly but seldom implemented. A preferential tariff only has value if it buys Pakistan time to fix these structural issues.

So where does this leave Islamabad? In the short term, a 19 % tariff is better than a 25 % or 50 % duty. It keeps Pakistan in the American market while avoiding a spiralling trade war. It also signals that the U.S. is willing to treat Pakistan as more than a security client. That said, Washington’s expectation of reciprocal investment opportunities can’t be ignored. American investors will demand regulatory clarity, secure access to mineral deposits and an end to political interference. Pakistan’s history of stalled mining deals and opaque contract awards could easily deter them.

China remains Pakistan’s largest creditor under CPEC 2.0.

China, meanwhile, will not watch passively as a rival expands its footprint. The second phase of CPEC has already diversified into technology and green energy, areas in which U.S. companies might also wish to invest. Islamabad will need to reassure Beijing that American partnerships are complementary rather than adversarial. Diplomatically, that means clearer communication and perhaps even tripartite ventures. Domestically, it means building institutions capable of managing complex, multilateral projects without succumbing to corruption or bureaucratic paralysis.

As a student of economics, I view this moment as a genuine opening rather than a guaranteed windfall. Pakistan has rarely enjoyed simultaneous friendship with multiple great powers. It now has the chance to secure investment from both Washington and Beijing while leveraging its geostrategic position. But opportunities come with obligations. Preferential access to the U.S. market and Chinese infrastructure loans will not transform the economy on their own.

Pakistan’s leaders must treat the tariff reprieve as a catalyst for deeper reform. That means broadening the tax net so that revenue doesn’t depend on a narrow base of salaried workers, ensuring transparent management of natural resources, and investing in education and technology to move beyond low‑value textiles and commodities. It also requires a more coherent foreign policy that recognises the benefits and limits of both American and Chinese partnerships. Sitting on the fence is not a strategy; strategic hedging is.

Tariff reprieve must trigger reforms, not delay them.

Ultimately, the question isn’t whether a 19 % tariff is a victory or a trap. It’s whether Pakistan can use this breathing space to build the kind of resilient, diversified economy that no longer lives at the mercy of external bailouts. If it can, then this unusual moment in the tariff wars will be remembered as a turning point. If it can’t, then today’s preferential rate will fade like so many past diplomatic achievements.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.