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#Trade #war #fallout #Political #Economy
On the one hand, due to the rise of trade disputes between the United States and China, Canada and Mexico, March 4, on March 4, was a day of deepest turmoil for the global economy. The severity of the global trade war increased the financial transit, which created significant instability.
In a bold move, which reinforced the World Trade Rift, US President Donald Trump imposed additional taxes on imports from China, Canada and Mexico. After a short period of grace, on February 4, 10 % tariff was imposed on Chinese goods. Imports from Canada and Mexico suffered a 25 % tariff.
These rates were considered necessary to deal with illegal immigration and drug flow in the United States. The immediate result was severe: global stock markets fell worldwide despite long -standing trade halt, frightening of troubled investors.
In retaliation, China, Canada and Mexico immediately implemented retaliation, targeting US exports. China focused on US agricultural products and imposed strategic export control on US defense contractors.
Canada unveiled a wide tariff package, which imposed a US $ 155 billion in tax on US goods. Initial phase, which affects imports at $ 30 billion, began on March 4, 2025. Additional tariffs on imports of $ 125 billion are due on March 25. Increasing trade barriers are ready to accelerate global economic volatility. Emerging markets, such as Pakistan, which are already suffering from financial stress, are expected to end up.
On March 4, Pakistan’s stock market reflected the gravity of the situation. The Pakistan Stock Exchange suffered a sharp decline in capitalization, the KSE -100 index decreased by 1,265 points. Investors’ confidence diminishes when concerns over delaying a significant $ 1.1 billion IMF limits increased.
During the first eight months of the financial year, the reduction of Rs 606 billion in income raised further doubts about the country’s ability to fulfill its financial responsibilities, which mobilized panic sales in key sectors like banking, energy and manufacturing.
Increasing the economic uncertainty, the ongoing security challenges in Pakistan have ruined the sentiments of investors. On the same day, a terrorist attack in Bannu’s cantonment in Khyber Pakhtunkhwa has promoted security related costs and further damaged confidence in Pakistan’s stability.
Despite some of the initial signs of economic stability in 2025, such as inflation and increasing reserves of foreign exchange, with limited access to the country’s structural defects, unexpected policies and external financing, there are significant risks.
External shock has identified Pakistan’s weakness due to its heavy dependence on imported crude oil. Since global commodity prices are increasing with the rising Americans of China’s trade tensions, oil prices fluctuations can significantly affect Pakistan’s energy sector.
S&P Global is likely to increase Pakistan’s crude oil imports by 5 % for the fiscal year ending June 30, and the entire calendar is likely to increase by 7 % in the year due to recession in industrial production. Although a change toward natural gas and renewable energy can help reduce the effects of rising oil prices, obstacles to global supply chains are a significant risk, potentially increasing costs and increasing inflation in essential equipment and transport services.
In retaliation, China, Canada and Mexico have implemented retaliation, targeting US exports. China has focused on US agricultural products and has implemented strategic export control over US defense contractors.
The currency market offers another source of concern. The rapid deportation of the Pakistani rupee against the US dollar can increase import costs, which further increases the cost of life. Since Pakistan is a pure importer of edible oil, machinery and industrial inputs, a weak rupee can increase production costs, which affects both consumers and businesses.
Pakistan’s edible oil sector, which relies on imports from Malaysia and Indonesia, is already facing prices fluctuations due to obstacles in the global supply chain. Pakistan is the fourth largest importer in the world of Palm Oil. Increasing trade disputes can increase its food inflation, which can put pressure on the nation’s economic fabric.
Investors’ confidence in emerging markets like Pakistan is suffering from increasing global threat. The prolonged uncertainty may discourage foreign direct investment, which is already a challenge for Pakistan. The key sector, such as manufacturing, technology and logistics, economic expansion and employment opportunities, can be reduced to the reduction of capital.
Pakistan’s textile and agricultural industries, which relies heavily on exports to China, the United States and the European Union, will cause lost global demand if the effects of trade war waves are lost.
For the storm season, Pakistan should adopt an active strategy. Diversifying its export markets with unconventional partners in Africa, Central Asia and ASEAN and strengthening trade relations with unconventional partners can reduce its dependence on unstable economies. Investing in domestic industries, especially food processing and energy, will be very important to reduce dependence on imports and increase economic flexibility.
By increasing cooperation in trade blocks, strengthening regional alliance can also provide Pakistan with a lifeline to navigate global trade barriers.
Rosing currency flexibility is equally important. To strengthen the rupee, external financing needs to be obtained, managing commercial imbalances and implementing sound monetary policies. Policy makers should promote a conducive environment for foreign investment and ensure the policy consistency and economic stability.
The summary is that Pakistan faces a confluence. External economic shocks and domestic weaknesses put the country at a crucial point. Its ability to navigate this complex crisis will depend on strategic policy -making, effective crisis management and creating a suitable environment for investment. Failure to make a decisive action can lead to long economic problems. A well -integrated response can turn it into a long -term economic growth and stability.
Author is a senior lecturer at Finance, renowned for international and trans -national education at Birmingham City University’s Accountability, Finance and Economics.
