Trump’s Trade War: Rupee At Risk As Pakistan Unprepared for New US Trade Tariffs

WASHINGTON: With US stock markets reeling from US President Donald Trump’s latest tariff announcements, countries like Pakistan could face the bad end of it soon enough.

The prospect of steeper reciprocal tariffs has sent shockwaves through global trade. An Islamabad-based investment banker told ProPakistani that the Pakistani Rupee could fall under pressure once the new US tariffs kick in.

“While tariffs don’t directly relate to us, the fact that they’ll be global and for protecting US trade so emerging economies like Pakistan will have to take few steps back to absorb them. The economic shocks will be huge, especially on regional local currencies. Perhaps the new China-Japan-South Korea bloc could help lower the impact on us but damages would still be guaranteed,” he added.

According to Chinese state broadcaster CCTV, South Korea, China and Japan will jointly respond to US tariffs to protect Asian exporters and shield regional trade.

Still, investors fear bigger problems than anticipated. This could lead to tighter financial conditions and reduced exports for emerging markets, particularly those reliant on trade with the US or indirectly affected by slowing demand.

For Pakistan, the fallout could be twofold. First, if global market turbulence weakens investor confidence, it may lead to capital outflows and pressure on the rupee. Foreign companies could halt operations in the country.

Second, as inflation concerns mount in the US, the Federal Reserve may maintain higher interest rates for longer, making dollar-denominated debt more expensive for economies like Pakistan, which is already grappling with external financing needs. The International Monetary Fund may increase interest rate on payback of the recently approved loan tranche for Pakistan.

The upcoming US jobs report will further shape market expectations, influencing risk appetite worldwide. A weaker-than-expected report may bolster recession fears, potentially impacting commodity prices and remittances—two key factors for Pakistan’s economic stability. As global markets prepare for heightened volatility, policymakers in Islamabad will need to carefully assess the trade and financial implications.

Read more: Trump’s 25% Car Tariff Sparks Trade War Fears and Market Volatility

What are reciprocal tariffs?

You should know that since reentering the White House, Trump has imposed a 20 percent tariff on China, announced a 25 percent tax on imported cars and trucks effective Thursday, increased duties on foreign steel and aluminum, and introduced levies on select Canadian and Mexican goods, with possible expansions expected this week.

Reciprocal tariffs aim to match US import duties with those imposed by other countries. “If they charge us, we charge them,” Trump said in February.

Experts question whether the US will adjust tariffs item by item or base rates on broader national averages. The uncertainty has created a volatile trade environment, making long-term planning difficult.