Pakistan’s stock market appears to have a clearer grasp of global economic realities than many of our policymakers. The staggering 7.31% plunge at the Pakistan Stock Exchange (PSX) on Monday—despite trading halts and circuit breakers—speaks volumes. The sell-off was driven by investor fears triggered by US “reciprocal” tariffs under the Trump administration, pointing to an escalating global trade war with potential long-term consequences.
While the PSX later recovered some losses, the market’s reaction reveals a deep-seated anxiety about the global economic landscape—an anxiety that no amount of optimism can easily mask. Finance Minister Muhammad Aurangzeb attempted to present the situation as an opportunity in disguise, expressing hope that Pakistan could leverage the crisis into a mutually beneficial trade scenario. However, between idealism and realism lies a wide chasm that Pakistan must navigate carefully.
The minister’s suggestion of offering reduced or zero tariffs on US imports in exchange for concessions, and the belief that Pakistan could gain a competitive edge over countries like Vietnam, Bangladesh, and Cambodia—who now face higher US duties—may be premature. The reality is, Pakistan lacks the robust production infrastructure and quality control that have made those countries successful exporters. Without significant reforms and investments in industrial productivity, especially in high-quality textiles and garments, Pakistan’s hopes of expanding its share in the US market are overly ambitious.
Moreover, President Trump’s aggressive stance on trade imbalances does not favor long-term partnerships. His administration’s approach prioritizes shrinking trade deficits through pressure and unilateral policy shifts. For Pakistan—a smaller, struggling economy—expecting special treatment or stable engagement in such a volatile environment may prove naive.
The broader concern, however, extends beyond bilateral issues. The global economy is now entering an era where the rules-based, multilateral trade order once upheld by institutions like the WTO is being dismantled. In its place, we see an emerging protectionist world where might dictates terms. This shift poses significant challenges for economies like Pakistan’s, which rely on predictable global systems to stay afloat.
As this uncertain phase unfolds, Pakistan must adopt a dual approach: continue to engage with the US and other trade partners in search of opportunity, but also urgently work on domestic reforms that boost industrial capacity, ensure product quality, and foster economic resilience. A policy based purely on hope or dependence on external goodwill will not suffice. The shocks of the new global order are real, and unless Pakistan prepares prudently, the consequences could be even more severe than a single day’s stock market crash.
