The international trade war

The international trade war refers to escalating economic conflicts where countries impose tariffs or other trade barriers against each other in retaliation or to protect domestic industries. A trade war happens when countries increase tariffs or quotas on imports from each other, usually in a tit-for-tat escalation. Accusations of unfair trade (e.g., currency manipulation, intellectual property theft); the desire to protect domestic industries, and geopolitical tensions can spark it. The most high-profile recent example was the U.S.–China trade war, but trade tensions have flared between other countries too. The U.S.–China trade war started in 2018 under President Trump, when the U.S. imposed tariffs on Chinese goods, accusing China of unfair trade practices, intellectual property theft, and forced tech transfers. China retaliated with tariffs of its own. The effects were tariffs on hundreds of billions worth of goods and disruption to global supply chains, hurting some U.S. farmers and businesses. Encouraged companies to diversify manufacturing away from China (like Vietnam, India, and Mexico). Even under President Biden, many tariffs remained in place. Other trade tensions were U.S. vs EU. Disputes over aircraft subsidies (Boeing vs Airbus), digital services taxes, and UK post-Brexit: Trade disputes with the EU and others. India vs U.S./China: Tariffs and trade restrictions. Russia & Western countries: Sanctions and export controls post-Ukraine invasion. Global Impact included higher costs for consumers and businesses, inflationary pressures, supply chain shifts, push toward de-risking or friend-shoring — moving supply chains to politically friendly countries and rise in protectionism vs. free trade. The Current Situation (as of 2025) is that tariffs between the U.S. and China are still in place. International trade recovers but remains tense. More focus on semiconductors, green tech, and AI as strategic assets. Countries are forming new trade alliances to hedge against conflicts. Let me analyze the implications of the U.S. tariffs on Pakistan, both in terms of economic impact and strategic response. Here is a breakdown and analysis of the key implications and necessary responses for Pakistan. The first are Implications for Pakistan’s Economy are the Immediate trade Impact. A 29% reciprocal tariff on Pakistani exports to the U.S. (especially textiles) will make goods significantly more expensive for U.S. consumers. As 72% of Pakistan’s exports to the U.S. are value-added textiles, the industry faces a direct hit, potentially reducing exports by 10–15% in the short term. Second are current accounts and balance of payments. The U.S. is Pakistan’s largest single-country export market ($5.4 billion in 2023-24) and a key source of its $2 billion trade surplus. A drop in exports will put pressure on the current account, possibly worsening Pakistan’s already fragile external sector. Third are the exchange rate and competitiveness. The higher tariff on Pakistan (29%) versus India (26%) creates a competitive disadvantage. However, Pakistan gains an edge over Bangladesh (37%), suggesting a shift in competitive positioning. Depreciation of the Pakistani Rupee can offset the tariff impact and maintain export competitiveness. Broader Economic Implications are the risks to the textile sector. Pakistan’s textile sector, already facing energy shortages, high input costs, and reduced investment, could face reduced global demand. The loss of U.S. market access could lead to the closure of units, unemployment, and a decline in industrial output. Then are the reduced global trade volumes. If global trade contracts by 7–10%, as estimated, it can hit hard developing economies like Pakistan. Falling global demand will not just affect the U.S. market but will spill over into other regions. The 29% tariff is a shock but also a wake-up call for Pakistan to diversify trade, modernize exports, and engage in deeper regional trade integration. Smart diplomacy and proactive policy can reduce damage and even uncover new export routes.