Textile sector: ICMA analysis shows US tariff challenges, opportunities

KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMA), through its Research and Publications Department, has released an analytical report on the implications of the recently imposed 29 percent reciprocal tariff by the United States on Pakistani exports.

While this tariff covers a broad range of goods, ICMA’s focused analysis examines its specific impact on Pakistan’s textile exports to the US, which constitute over 70 percent of the country’s total exports to that market.

The report highlights that this sudden policy move by US President Donald Trump poses serious short-term challenges for Pakistan’s textile sector. The new tariff threatens to reduce export volumes, shift U.S. orders toward countries with lower tariffs, and lead to potential job losses and factory closures, especially among small and medium-sized exporters.

Higher costs and squeezed profit margins may further undermine the sector’s competitiveness. However, the 90-day freeze on the implementation of the tariff provides a valuable window of opportunity for the Government of Pakistan to engage in successful negotiations with the US Administration and seek possible relief.

Despite these challenges, ICMA’s analysis identifies a strategic opportunity. While Pakistan faces a 29 percent tariff, many of its regional competitors—such as China with now 125 percent tariff, Bangladesh (37%), Vietnam (46%), Cambodia (49%), and Sri Lanka (44%)—have been subjected to even steeper duties under the same US policy. However, countries like India and Turkey now enjoy a relative advantage due to lower tariffs of 26% and 10% respectively, placing Pakistani exports at a comparative disadvantage in the US market.

ICMA recommends immediate diplomatic engagement with the United States to negotiate tariff relief or secure preferential access for Pakistani textile goods. It is encouraging to note that Finance Minister Muhammad Aurangzeb has recently announced that a delegation from Pakistan will soon be visiting the United States for trade talks. This planned engagement presents a timely opportunity to raise the issue of tariffs on Pakistani exports and advocate for more favorable trade terms.

ICMA suggests that the government should consider offering urgent support to the textile sector by reducing duties on essential raw materials like cotton yarn, and by introducing tax incentives to reduce production costs and maintain global competitiveness. ICMA also urges the development of targeted strategies to compete more effectively with Indian and Turkish exporters in the US market. At the same time, Pakistan should increase its export presence in the European Union, where global supply chain shifts due to U.S. tariffs could open new opportunities.

The report emphasizes the need to pivot toward high-value textile products such as denim, knitwear, and fashion garments—areas where Pakistan already enjoys international credibility for quality and craftsmanship.

Further, ICMA stresses the importance of diversifying export destinations beyond traditional markets. It recommends expanding into high-potential regions such as the Gulf, Central Asia, Africa, and Southeast Asia, particularly with value-added products. Policymakers should also review Pakistan’s tariff regime on US imports as a diplomatic gesture, and continuously monitor US tariff policy on other exporting nations to ensure strategic adjustments.

Copyright Business Recorder, 2025