The economic strategies of US presidential candidates Donald Trump and Kamala Harris, though divergent in many areas, could have significant implications for Pakistan’s trade and investment relations with the United States.

Pakistan exports nearly a fifth of its goods to the US, with textiles and apparel being major contributors. However, Pakistan’s foreign direct investment (FDI) from the US is relatively modest, making up only four percent of total FDI in FY24. This underscores the critical role of US policies, particularly those related to tariffs and trade.

Trump’s “America First” policies, including steep tariffs on Chinese goods, could adversely affect Pakistan, particularly in the textile sector, where it competes with countries benefiting from the US-Dominican Republic-Central America Free Trade Agreement (CBTPA).

A 10% tariff increase on imports could erode Pakistan’s price advantage, exacerbated by high domestic costs. Conversely, Harris, who favors dialogue with China, is less likely to impose new tariffs on countries like Pakistan but may target nations where Chinese production has shifted, such as Vietnam.

Both candidates have proposed policies to boost US middle-class purchasing power. Harris aims to expand child tax credits and provide tax relief to 100 million Americans, potentially increasing demand for consumer goods like apparel. Trump’s proposal to temporarily cap credit card interest rates could similarly boost consumer spending.

However, on corporate taxes, the two candidates diverge sharply. Harris supports increasing the corporate tax rate to 28%, which could dampen US investment abroad, including in Pakistan. In contrast, Trump’s proposed corporate tax cut for domestic manufacturers might further reduce demand for imports, negatively impacting Pakistani exports.

Ultimately, while both candidates seek to strengthen the US economy, their policies could lead to missed opportunities or new challenges for Pakistan, depending on how the geopolitical and economic landscape unfolds.

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