Tariffs, a trade deal and the promise of oil

Background

The United States is Pakistan's largest single export market, especially for textiles and garments. According to the US Trade Representative, two-way trade in goods and services was about $10.1 billion in 2024, with a US goods trade deficit with Pakistan of about $3.0 billion¹.

What happened

On 2 April 2025 President Trump announced "reciprocal" tariffs on most trading partners; Pakistan's rate was set at 29 per cent, then suspended for 90 days to allow negotiation². Pakistani ministers travelled to Washington and offered to buy more American goods, including cotton, soybeans and energy.

On 30 July Pakistan announced that a deal had been reached. Trump wrote on social media that the United States and Pakistan would work together on developing Pakistan's "massive" oil reserves and were choosing an oil company to lead the partnership; Pakistan's finance ministry said the deal would reduce reciprocal tariffs, especially on Pakistani exports, and open cooperation in energy, mines and minerals, information technology and cryptocurrency^2,3. An executive order signed on 31 July set Pakistan's reciprocal tariff at 19 per cent from 7 August, below the rates applied to India and several other regional competitors⁴.

On 20 February 2026 the US Supreme Court ruled that the International Emergency Economic Powers Act did not authorise the president to impose tariffs, invalidating the reciprocal tariffs. The administration replaced them with a temporary across-the-board 10 per cent tariff under Section 122 of the Trade Act of 1974, which can last for no more than 150 days without congressional approval⁵. Pakistan and the United States resumed talks on a bilateral reciprocal trade framework; in July and August 2026 both sides said negotiations had advanced significantly, but no agreement had been signed by the end of August^6,7.

Why it mattered

The 2025 deal gave Pakistan a tariff advantage over some competitors and tied trade to a broader economic agenda - energy, minerals and digital services - that both governments presented as the foundation of a new relationship. Sceptics in Pakistan questioned the scale of the oil reserves Trump described, and the legal turmoil over US tariffs made the terms uncertain.