Pakistan’s export sector is undergoing a seismic shift, one that will affect its competitive edge for years to come. The US has imposed ‘reciprocal tariffs’ globally, including a 29% duty on Pakistan, as part of its protectionist policy.

The misaligned trade diplomacy - relying on the US as its largest market for value-added exports while maintaining an intertwined supply chain with China - underscores how the 29% tariff is merely the first step toward a deeper economic pit that Pakistan risks falling into.

Structural inefficiencies - worsened by regressive taxation and ill-conceived energy policies - have already eroded Pakistan’s export competitiveness. This year marked a turning point when over 50% of Pakistan’s textile import bill was dominated by cotton and cotton yarn - a trend never seen before.

Once a leading producer, Pakistan is now increasingly reliant on imports, with cotton yarn imports expected to surge nearly 200% and the cotton import bill projected to rise by over 50% this financial year. Together, these are projected to cost the economy a staggering $2.8 billion, with the combined total for cotton imports and textile intermediates reaching $4.4 billion.

While Pakistan sources the bulk of its raw cotton from the US and Brazil, over 60% of its cotton yarn imports- cheaper than domestic yarn - now come from China, raising concerns over potential dumping and associated compliance risks.

As we officially enter the global trade war, beyond tariffs, another non-tariff threat looms: the potential for a US ban on Pakistani exports.

In 2019, the US banned Chinese cotton from Xinjiang over ‘forced’ labour concerns, extending restrictions to any product containing Xinjiang cotton, regardless of origin.

However, through strategies such as China Plus One, trans-shipment, and third-country exports, China has sustained its presence and deepened its hold on the global textile supply chain. In 2024, China exported $3 billion worth of cotton intermediates to eight South Asian countries, including Pakistan, accounting for 30% of its $10.8 billion global exports in this segment.

While Pakistan didn’t directly benefit from China Plus One, it has become a key market for cheap Chinese textile intermediates, including knitted and woven fabrics, filament yarn, and cotton yarn.

Despite US policies and growing supply chain scrutiny, Pakistan........

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