Trump tariffs: It ain’t over till it’s over!

“Of all manifestations of power, restraint impresses men most”. ThucydidesThe Liberation Day, April 02, “Reciprocal Tariffs” and the follow-through have been anything but.Singaporean PM, Lawrence Wong, noted with resignation that the recent “Liberation Day” announcement by the US leaves no room for doubt..... The era of rules-based globalization and free trade is over. We are entering a new phase – one that is more arbitrary, protectionist, and dangerous“. Former RBI Governor, Raghuram Rajan, has called it a “jhatka” and a self-goal, at least for the short run.The men and few women, “manning” the barricades at Pak Secretariat, will be risking the nation’s future if they focus only on the Reciprocal Tariffs to the exclusion of the bigger picture. Do not miss the forest for the trees. The MFN centered WTO framework is dead, at least for now.The US wants to reindustrialize and throw sand into the wheels of the Chinese juggernaut, 145% tariff etc., and in a side hustle, collect billions from average Americans to pay for tax cuts. Friend shoring, China +1, have been tossed to the sea. Is it the latter-day Iron Curtain? Hum kahan kay dana thay, kis hunar mein yakta thay/Bay-sabab hua Ghalib dushman aasmaan, apna!Now, there are three kinds of US import taxes. The extant taxes on imports, the Reciprocal ad valorem Taxes, which in itself are two taxes, 10% base tax on all goods, effective since April 05, no reprieve here, levied on practically all on God’s earth including the US’ FTA partners and the Reciprocal Tax, 29% for Pakistan, only the latter has been suspended for 90 days. The 10% is the “entry fee” to earn the privilege of access to the US market! These taxes will destroy demand in the US and elsewhere and may cause price wars among exporters. So, what must Pakistan do, then?One, Pakistan must work with its US buyers to make a case for tariff reduction, carve-outs, from the in-abeyance 29% levy.Two, Pakistan could explore the US tax provision which could allow the value of American content in our exports for a tariff offset. The “Reciprocal Rates only apply to non-US content value of goods where at least 20 percent of the value is US originating. US content is defined as the value of an article attributable to the components produced entirely, or substantially transformed in, the US. 90-day reprieve is the moment to explore it and has to be led exclusively by some sharp exporters and funded by the EDF. Fellow travellers, bureaucrats and journeymen cannot deliver.Three, Pakistan may import more. Boeings, F-16s, HIMARS, Ford F-Series, etc. We can import more energy. More cotton, yes. China’s erstwhile purchases of US cotton have now been tariffed out. Surplus US cotton is up for grabs and Bangladeshis and Pakistanis, etc., will have a food fight over this lot of silver fiber.Four, Pakistan can zero rate US imports. Even if Pakistan does that, it still might not work, a la Vietnam below. Nobody knows what the US wants. Any way, Pak tariffs are designed by Q Block to meet this month’s tax target and reek of anti-export bias.Reportedly, 75 or more impacted countries, no penguins yet, have made the beeline for Washington to kiss the ring. Peter Navarro, Senior Counsellor to the US President, in an interview, however, out rightly rejected Vietnam’s offer to eliminate import taxes, saying that was not enough and that the Administration was more concerned with Non-Tariff Barriers. This Alice-in-Wonderland economics seems to aim at zero trade balance/surplus with all partners, simultaneously!Five, even if sense prevails, there is no going back to China exporting, especially textiles, at scale to the US and importing cotton. This is a curt notice to China to expedite its exit from low value trades. Let us see whether Pak Secretariat and tariffed textile tycoons can see an opportunity here. Bangladesh and China have been extremely busy at that.Hoping against hope, if Pak Secretariat finds the vision and the guts, it can morph this US “pressure into motivation” and extirpate the entire anti-export bias, ACDs, RDs, etc. Interestingly, if Pakistan reduces tariffs for the US, then under the MFN principle all trading partners will generally have to be extended the same relief. That is the silver lining.Concomitant with this American engagement, Pakistan must immediately and seriously engage with China to explore/set up infrastructure, parks and more for attracting its share of this mass Chinese migration. It can launch Pakistan into MMF universe while retaining local/ US cotton base. This migration can prime Pakistan for a quantum leap into USD 40 to 50 billion export league.Where do the Chinese textile volumes especially, MMF volumes, migrate to after China disengages from these low value trades? Are we brave enough to seize the moment?Pakistan; where manufacturers/exporters, are tarred as “thieves” by the Pak Secretariat, has since long been barely able to keep the wolf from the door. These tariff hikes are nothing less than a black warrant, not because, ceteris paribus, 10-20% or more of our US exports are at risk, but because nobody seems to be seized of the second order effects and the new paradigm. The contagion is likely to spread leading to demand destruction elsewhere as well, which in turn may lead to stress in the local credit markets.Pakistan’s largest customer, the US, wants to do business in a different way. Let us try and find common ground while preparing for the new world, which, I have a feeling, if done right, is not as dark as it seems.Last but not least, in a perverted sense, these tariffs are, it seems, the much-needed fillip to wean consumers from overconsumption, a positive for ESG goals. An average US vehicle is 12.6 years old, average passenger cars are even older. It seems blue jeans and wheels are going to stick with their owners for longer periods.Copyright Business Recorder, 2025

“Of all manifestations of power, restraint impresses men most”. Thucydides The Liberation Day, April 02, “Reciprocal Tariffs” and the follow-through have been anything but. Singaporean PM, Lawrence Wong, noted with resignation that the recent “Liberation Day” announcement by the US leaves no room for doubt.

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. The era of rules-based globalization and free trade is over. We are entering a new phase – one that is more arbitrary, protectionist, and dangerous“.

Former RBI Governor, Raghuram Rajan, has called it a “jhatka” and a self-goal, at least for the short run. The men and few women, “manning” the barricades at Pak Secretariat, will be risking the nation’s future if they focus only on the Reciprocal Tariffs to the exclusion of the bigger picture. Do not miss the forest for the trees.

The MFN centered WTO framework is dead, at least for now. The US wants to reindustrialize and throw sand into the wheels of the Chinese juggernaut, 145% tariff etc., and in a side hustle, collect billions from average Americans to pay for tax cuts.

Friend shoring, China +1, have been tossed to the sea. Is it the latter-day Iron Curtain? Hum kahan kay dana thay, kis hunar mein yakta thay/Bay-sabab hua Ghalib dushman aasmaan, apna! Now, there are three kinds of US import taxes. The extant taxes on imports, the Reciprocal ad valorem Taxes, which in itself are two taxes, 10% base tax on all goods, effective since April 05, no reprieve here, levied on practically all on God’s earth including the US’ FTA partners and the Reciprocal Tax, 29% for Pakistan, only the latter has been suspended for 90 days.

The 10% is the “entry fee” to earn the privilege of access to the US market! These taxes will destroy demand in the US and elsewhere and may cause price wars among exporters. So, what must Pakistan do, then? One, Pakistan must work with its US buyers to make a case for tariff reduction, carve-outs, from the in-abeyance 29% levy. Two, Pakistan could explore the US tax provision which could allow the value of American content in our exports for a tariff offset.

The “Reciprocal Rates only apply to non-US content value of goods where at least 20 percent of the value is US originating. US content is defined as the value of an article attributable to the components produced entirely, or substantially transformed in, the US. 90-day reprieve is the moment to explore it and has to be led exclusively by some sharp exporters and funded by the EDF.

Fellow travellers, bureaucrats and journeymen cannot deliver. Three, Pakistan may import more. Boeings, F-16s, HIMARS, Ford F-Series, etc.

We can import more energy. More cotton, yes. China’s erstwhile purchases of US cotton have now been tariffed out.

Surplus US cotton is up for grabs and Bangladeshis and Pakistanis, etc., will have a food fight over this lot of silver fiber. Four, Pakistan can zero rate US imports.

Even if Pakistan does that, it still might not work, a la Vietnam below. Nobody knows what the US wants. Any way, Pak tariffs are designed by Q Block to meet this month’s tax target and reek of anti-export bias.

Reportedly, 75 or more impacted countries, no penguins yet, have made the beeline for Washington to kiss the ring. Peter Navarro, Senior Counsellor to the US President, in an interview, however, out rightly rejected Vietnam’s offer to eliminate import taxes, saying that was not enough and that the Administration was more concerned with Non-Tariff Barriers. This Alice-in-Wonderland economics seems to aim at zero trade balance/surplus with all partners, simultaneously! Five, even if sense prevails, there is no going back to China exporting, especially textiles, at scale to the US and importing cotton.

This is a curt notice to China to expedite its exit from low value trades. Let us see whether Pak Secretariat and tariffed textile tycoons can see an opportunity here. Bangladesh and China have been extremely busy at that.

Hoping against hope, if Pak Secretariat finds the vision and the guts, it can morph this US “pressure into motivation” and extirpate the entire anti-export bias, ACDs, RDs, etc. Interestingly, if Pakistan reduces tariffs for the US, then under the MFN principle all trading partners will generally have to be extended the same relief. That is the silver lining.

Concomitant with this American engagement, Pakistan must immediately and seriously engage with China to explore/set up infrastructure, parks and more for attracting its share of this mass Chinese migration. It can launch Pakistan into MMF universe while retaining local/ US cotton base. This migration can prime Pakistan for a quantum leap into USD 40 to 50 billion export league.

Where do the Chinese textile volumes especially, MMF volumes, migrate to after China disengages from these low value trades? Are we brave enough to seize the moment? Pakistan; where manufacturers/exporters, are tarred as “thieves” by the Pak Secretariat, has since long been barely able to keep the wolf from the door. These tariff hikes are nothing less than a black warrant, not because, ceteris paribus, 10-20% or more of our US exports are at risk, but because nobody seems to be seized of the second order effects and the new paradigm. The contagion is likely to spread leading to demand destruction elsewhere as well, which in turn may lead to stress in the local credit markets.

Pakistan’s largest customer, the US, wants to do business in a different way. Let us try and find common ground while preparing for the new world, which, I have a feeling, if done right, is not as dark as it seems. Last but not least, in a perverted sense, these tariffs are, it seems, the much-needed fillip to wean consumers from overconsumption, a positive for ESG goals.

An average US vehicle is 12.6 years old, average passenger cars are even older. It seems blue jeans and wheels are going to stick with their owners for longer periods.

Copyright Business Recorder, 2025.