The US tariffs imposed on China, Mexico, and Canada are expected to benefit Pakistan’s economy by reducing commodity prices, which will enhance import affordability and support export-oriented sectors. Despite concerns regarding US aid, minimal impact is anticipated, with stable foreign inflows expected to bolster the economy further, particularly in sectors like banking and textiles.
A recent report from AKD Securities suggests that the United States’ recent tariffs on China, Mexico, and Canada could positively affect Pakistan’s economy, primarily because of its heavy reliance on imports. With the potential for decreased global commodity prices, especially oil, Pakistan may experience lower costs for essential imports, which would in turn support its export-driven sectors like textiles and technology.
The brokerage firm notes that these tariff measures will likely depress commodity price forecasts due to a strengthened US dollar and elevated interest rates as the global economy weakens. “We believe the imposition of tariffs by the USA on Mexico, Canada, and China is positive for Pakistan, given its import-led position,” stated AKD Securities in its latest report.
Following the tariffs signed by President Trump, Mexico and Canada have made progress in negotiations to avoid these fees. Notably, Mexican President Claudia Sheinbaum has committed to deploying National Guard personnel to combat drug trafficking, while Canadian Prime Minister Justin Trudeau achieved a temporary pause in tariffs by promising increased border security measures.
AKD Securities emphasizes that despite concerns surrounding US aid freezes to Pakistan, the expected fiscal impact will be minimal, as the government has budgeted only $21 million in USAID grants for the fiscal year amidst a larger $26 billion external financing requirement. The report also highlights that any tariffs on US remittances could marginally affect Pakistan’s external accounts.
On a positive note, the brokerage projects that Pakistan’s currency will stabilize, fueled by improved foreign inflows and remittance growth. As the country aims to secure $7.5 billion in concessional loans from multilateral lenders, the report suggests that the stock market is reacting favorably to these economic indicators, with falling interest rates anticipated.
The report predicts a 250 basis points reduction in the State Bank of Pakistan’s interest rates through 2025, positively impacting market sectors such as banking, energy, and textiles. Analysts hold an overweight position on these industries due to the benefits from expected monetary easing, stable exchange rates, and declining commodity prices, while advising caution on the power sector and chemicals.
The backdrop of the report involves the US administration’s imposition of tariffs aimed at curbing imports from China, Mexico, and Canada, significantly impacting trade dynamics. These tariffs are intended to pressure these nations into addressing issues related to migration and drug trafficking. The report discusses how these measures lead to an effective slowdown in global commodity prices and create potential opportunities for economies like Pakistan, which depend on imports for growth.
In conclusion, Pakistan is poised to benefit economically from the US tariff measures through reduced import costs and strengthened export sectors. While potential challenges exist concerning US aid and remittances, optimistic projections indicate stability in the currency and a promising stock market outlook. Consequently, certain industries are expected to thrive under the changing economic landscape, provided that interest rates decline as anticipated.
Original Source: tribune.com.pk
