Govt euphoric over US trade deal, but keeps terms under wraps

Express Tribune

3 days ago

Finance Minister Muhammad Aurangzeb meets with US Secretary of Commerce Howard Lutnick during his visit to Washington. Photo: APP
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As the government is tightlipped on the fine points of the US-Pakistan trade deal, background discussions suggest Washington might have gained market access at zero tariffs in return for investing in critical sectors and giving Islamabad favourable treatment compared to regional peers.
Field Marshal Asim Munir's meeting with President Donald Trump and Pakistani negotiators' positive approach towards resolution of the issue before the August 1 deadline played a role in securing a better and early deal.
Tariffs on Pakistani exports will be lower than regional competitors from South Asia and Southeast Asia, mainly India, Vietnam and Indonesia.
Pakistan's chief negotiator, Finance Minister Muhammad Aurangzeb, termed it a "real win-win deal" for both the countries, which has protected Pakistani exports from retaliatory higher tariffs. But the final tariffs might be higher than the pre-retaliatory tariffs of around 9.8%.
The US may now export goods to Pakistan at virtually zero rates but the effective date of the zero tariffs may be from July 2026 due to needed legislative changes, said the Pakistani authorities on condition of anonymity.
No tariffs on US goods will be in the benefit of consumers who will have quality goods but still their prices might be more than Made-in-China goods.
In return, the US tariffs on Pakistan will be lower than 29%, which President Donald Trump announced in April compared to the average 9.8% prevailing rates at that time.
Aurangzeb said that the US will also invest "first in energy, then in minerals, mines, information technology, digital infrastructure and new economy".
People privy to multiple rounds of trade discussions said on Thursday that the United States had set two key demands for a trade deal with Pakistan: lower tariffs on its exports to Pakistan to zero with total access to markets; and exemption to its companies from 5% tax imposed under the Digital Presence Proceeds Act 2025.
Hours before President Donald Trump's announcement that his administration reached a deal with Pakistan, the Federal Board of Revenue issued a notification to withdraw the 5% tax.
Commerce Secretary Jawad Paul, who was part of the negotiating team, did not comment whether Pakistan accepted the US demand for zero tariffs with complete market access.
There was no formal announcement from either side on what tariff rate was agreed upon, but the Pakistani embassy in Washington said the agreement "will result in the reduction of reciprocal tariff (29%) especially on Pakistani exports to the United States".
The deal was reached during a meeting of Aurangzeb, US Secretary of Commerce Howard Lutnick, and US Trade Representative Ambassador Jamieson Greer. Commerce Secretary Jawad Paul and Pakistan's Ambassador to the US Rizwan Saeed Sheikh were also present during the meeting.
The sources said that Pakistan had expected that in return the US would set import tariffs in the range of 15% to 19%, preferably close to 15%, which is lower than the retaliatory rate but higher than the pre-April rates.
Till the filing of the story no announcement was made either by the US or the Pakistani government about the final tariff for Pakistan.
Pakistan also sought concessions for export of its agriculture products, said the sources.
One thing was clear that Pakistan will not be at a disadvantageous position compared to regional countries due to its constructive approach in dealing with the issue, said another government official.
One of the issues might be any concerns being shown by Pakistan's other trading partners. To deal with the matter, there is a possibility that both sides show intentions to sign preferential trade agreement or a free trade agreement, said the sources.
President Donald Trump also talked about exploring Pakistan's oil reserves with US companies. A Petroleum Division official said that there was a possibility that any US company can participate in the upcoming offshore drilling.
The Express Tribune reported last week that the Petroleum Division was seeking bids from interested investors to grant rights for drilling on offshore well and it would open the bids on October 31, 2025.
The report further stated that earlier Oil and Gas Development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL) struggled to find hydrocarbon reserves in an offshore zone in Arabian Sea in association with US energy giant ExxonMobil and Italian firm Eni. Pakistan has made 17 attempts to make offshore drilling but they did not yield the desired results.
"From our perspective, it was always going beyond the immediate trade imperative. The whole point of this is that trade and investment have to go hand-in-hand," the finance minister said after reaching the deal with the US.
"The role of the private sector is prominent, because when we were trying to figure out how to reduce or end the trade imbalance, the private sector was the first constituent who came up and said they will help," Aurangzeb said.
In the last fiscal year, Pakistan exported $6 billion worth of goods to the US compared to $2.4 billion imports, earning a surplus of $3.7 billion, a source of concern for President Donald Trump.