By Staff Reporter
ISLAMABAD: Pakistan and the United States are in the final stages of negotiations to cement a trade and investment agreement that could reshape economic ties, bolstered by a reduced US tariff rate of 19 percent on Pakistani goods.
The tariff, significantly lower than the initially proposed 29 percent, positions Pakistan as the South Asian nation with the lowest US tariff rate, undercutting regional competitors such as India (25 percent), Bangladesh (20 percent), Vietnam (20 percent), and Sri Lanka (20 percent), Bloomberg reported on Monday.
Bilal Azhar Kayani, Pakistan’s Minister of State for Finance, told Bloomberg TV that Prime Minister Shehbaz Sharif’s government is pushing for improved tariff terms on key exports as part of ongoing talks. “The agreement with more details will be negotiated and discussed in the months ahead,” Kayani said.
The trade deal, agreed in principle last month, marks a warming of US-Pakistan relations after years of strained ties. The breakthrough follows a rare White House meeting between US President Donald Trump and Pakistan’s Chief of Army Staff, field Marshal Asim Munir, who is on his second US visit in recent months.
A key pillar of the agreement is energy cooperation, with Trump announcing that the US will partner with Pakistan to develop what he described as the country’s “massive oil reserves.” The US is currently selecting an oil company to lead the initiative, Trump said, though details on the reserves remain unclear.
“We have just concluded a deal with the country of Pakistan, whereby Pakistan and the United States will work together on developing their massive oil reserves,” Trump posted on his Truth Social platform on July 30, calling it “a significant beginning” for a long-term energy partnership.
The announcement came on the same day Trump escalated trade tensions with India, imposing a 25 percent tariff on its exports, later raised to 50 percent, one of the highest rates applied to any US trading partner. The move was tied to India’s continued purchase of Russian oil and weapons, with Trump threatening further sanctions on Russia’s allies if President Vladimir Putin does not move to end the war in Ukraine.
Trump also expressed frustration with India’s role in the BRICS grouping, which he labeled “anti-US,” and took a swipe at New Delhi during the Pakistan deal announcement, suggesting Pakistan “may be selling oil to India one day.” The comment came as an Indian Prime Minister Narendra Modi plans to visit China later this month, his first trip there in over seven years, further straining US-India ties.
Pakistan’s trade surplus with the US, valued at $3 billion in 2024, is largely driven by textile exports, with the US serving as the country’s largest single-country market. The reduced 19 percent tariff is expected to boost Pakistan’s textile and apparel sectors, potentially increasing export earnings and spurring industrial growth.
The energy component of the deal has sparked particular interest, with Pakistan’s largest refiner, Cnergyico, set to import one million barrels of US crude oil in October through global commodity trader Vitol. This marks a shift from Pakistan’s traditional reliance on Middle Eastern suppliers, which account for nearly all of its $11.3 billion annual oil imports.
While Trump’s reference to “massive oil reserves” has raised eyebrows, given Pakistan’s modest proven reserves of 234 million to 353 million barrels, recent discoveries in Khyber Pakhtunkhwa’s Waziristan block and potential offshore deposits in the Indus and Makran basins have fueled optimism. However, experts caution that commercial extraction, particularly offshore, could require billions in investment and years to materialize.
The deal also carries strategic implications, with the US eyeing Pakistan’s Balochistan province, rich in minerals and bordering Iran, as a geopolitical counterweight to China’s influence through the $65 billion China-Pakistan Economic Corridor (CPEC). Security challenges in Balochistan, where insurgent groups have targeted resource projects, remain a hurdle.
Pakistan’s Finance Ministry hailed the agreement as a “landmark deal” that would enhance cooperation in energy, mining, IT, and cryptocurrency. Finance Minister Muhammad Aurangzeb, who led negotiations alongside Foreign Minister Ishaq Dar, described it as a “new era of economic collaboration.”
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