The recent US tariffs on China, Mexico, and Canada are expected to have a positive impact on Pakistan’s economy, especially given the country’s reliance on imports, according to AKD Securities. The report suggests that these tariffs could lead to lower global commodity prices, particularly oil, as the US dollar strengthens and interest rates stay high.
Pakistan, an import-driven economy, stands to gain from lower costs for key commodities, which could benefit export-focused industries like textiles and technology. AKD Securities states that the tariff measures should reduce commodity price outlooks, given a stronger dollar and prolonged higher interest rates in the US, alongside weaker global economic growth.
On February 1, US President Trump imposed 25% tariffs on Mexico and Canada, with exceptions for Canadian energy and oil exports, and a 10% tariff on China. These tariffs are intended to pressure the countries to address migration and drug flow into the US. However, Mexico and Canada reached agreements with the US to avoid these tariffs, with Mexico deploying 10,000 National Guard officers to address drug trafficking and migration, and Canada negotiating a 30-day tariff pause after improving border enforcement.
The report also notes that these shifting trade dynamics are likely to reduce global commodity prices, benefiting Pakistan by lowering its import costs. Pakistan’s exports to the US make up 19% of the country’s total exports, and no direct tariffs are anticipated on Pakistani goods, which make up only a small proportion of US imports.
While concerns over the freeze of US aid exist, AKD Securities believes the financial impact will be minimal, as the government had only budgeted $21 million in grants from USAID for FY25. The firm also cautions that tariffs on remittances from the US could have a minor negative impact on Pakistan’s external account.
Despite these concerns, AKD Securities expects the Pakistani currency to remain stable, driven by higher foreign inflows, improved remittance flows, and a reduced import bill. The firm also predicts falling interest rates and a stable exchange rate will strengthen Pakistan’s stock market. As a result, AKD Securities has an “overweight” stance on several sectors, including banking, energy, fertilizer, cement, oil marketing, autos, textile, and technology stocks.
