resident Trump’s mind-numbing tariffs would have wrought economic havoc across the globe. A recession has already started and is likely to deepen, unless some of his policies are reversed permanently. The Fed is in a bind, caught between worsening prospects for both growth and inflation.

The US president has behaved increasingly like a mobster or an absolute monarch. He appears to be a man in a hurry to make history, who believes that his power is unfettered. He also seems to relish employing painful means for the sake of an end that is a mirage: greatness defined as restoring factory jobs to America.

President Donald Trump’s recent announcement of sweeping tariffs included a universal 10 percent duty on all imports into the US, with significantly higher rates for specific countries. China now faces tariffs exceeding 50 percent, Vietnam 46 percent, Bangladesh 37percent and India 26 percent. Pakistani exporters were to bear a tariff of 29 percent on exports to the United States.

The US is a crucial market for both Pakistani and Indian textile industries. Historically, Pakistan has paid tariffs ranging from 12 percent to 22 percent on its textile exports to the US. The imposition of new tariffs will likely exacerbate the challenges faced by Pakistan’s textile sector, which has already seen a decline in exports.

India’s textile industry, while also impacted by a 26 percent tariff, may be slightly better placed due to its more diverse export portfolio and larger economy. However, the enhanced tariffs will still pose significant challenges for Indian exporters.

Overall, the heightened tariffs are expected to have a substantial negative impact on the textile exports of both Pakistan and India, potentially leading to reduced export volumes and financial strain on their textile industries.

When a major economy like the United States imposes tariffs under a protectionist policy (like Trump did during his earlier presidency), smaller countries like Pakistan have to carefully consider their response. Let’s look at some important factors:

Smaller countries usually don’t have the economic strength to retaliate with equal force. However, they can always strategise smartly. Pakistan, for instance, can reduce its dependence on the US by strengthening trade ties with China, ASEAN, EU, Middle East and Africa. It should participate in regional trade agreements (e.g., RCEP, ECO) that can help it access alternative markets.

Instead of exporting raw or semi-finished goods, Pakistan should aim to export value-added products (e.g., apparel instead of cotton yarn, processed food instead of rice). This will help offset tariff losses with higher unit prices. Pakistan should also utilise its GSP+ status with the EU or negotiate FTAs with its other trading partners. It is clear that higher US tariffs will cause a reduction in the volume of textile exports to the US. To compensate for the loss, the exporters and the government must lobby for trade concessions from countries interested in countering US influence (like China or Russia).

Smaller countries usually don’t have the economic strength to retaliate with equal force, but they can strategise smartly. Pakistan, for instance, can reduce its dependence on the US by strengthening trade ties with China, ASEAN, EU, Middle East and Africa.

Unfortunately, higher tariffs on Pakistani exports to the US have been announced at a time when our textile sector is already in a bad shape. Our competitiveness was already eroded by high energy and logistic costs. The government of Pakistan has taken some steps to reduce the burden of high power tariff on industries but our logistics are the most inefficient in the region. The government will have to spare funds from non-essential expenses to offer incentives to exporters hurt by US tariffs. The exporters must enhance product standards to meet the needs of alternative markets.

Pakistan has been weak in exploiting diplomatic channels for trade. But Trump’s recent measures call for serious efforts to work with other affected countries at the WTO or form alliances at global forums to highlight the negative impact of tariffs on developing economies.

For the most part, it is the American consumers that will pay these tariffs. Studies from Trump’s trade war show that US shoppers footed the bill for tariffs through higher prices. So while the US tries to protect its industrialists, their families will pay more for their clothes. But we need to be ready. Our textile industry faces challenges like power shortages and obsolete machinery. We must invest in modernisation to handle more orders and stay competitive. The question is: can Pakistan turn the new tariff situation into a win?

Trump’s tariff measures will hurt exports to US from all countries. Trade outside the US will however be less affected. This will be especially true of intra-Asian and South-South trade. The reason is that China, India, the ASEAN and Africa have growing consumer markets. With US tariffs pushing global supply chains to “de-Americanise” many firms are setting up manufacturing bases in Vietnam, Bangladesh, India and elsewhere.

Digital trade, export of services and regional production hubs are becoming more important, reducing reliance on the US. However, if US tariffs spark a global trade war, there can be second-order effects like slower global GDP growth, reduced investment flows and a shift in investor confidence.

The Indians are acting cool. Their confidence stems from several reasons. One of those is that their dependence on the US market is relatively low. Exports make up 18-20percent of India’s GDP and the US accounts for a fraction of that.

India’s growth is driven mostly by domestic consumption, services and infrastructure spending. India exports more services (IT, pharma, consulting) than goods to the US and these are less likely to be targeted by tariffs. Also, the US tariff on Indian textiles is the lowest in Asia. This gives Indian exporters confidence that they can end up with higher textile exports despite lower uptake in the US.

Moreover, despite certain disagreements, India is seen by the US as a strategic partner in Asia. This makes aggressive tariffs less likely and short-lived. If needed, India can shift its exports or incentivise local industry. It has a large enough internal market to absorb short-term export shocks.

Pakistan has to be nimble: it must diversify its markets, climb up the value chain and leverage its geo-economic position. Last year it exported $5.2 billion worth of good to the US while importing $2.1 billion, resulting in a trade surplus of $3.1 billion. The higher tariff could result in lower exports (by around $1 billion). The country can make up the loss by diversifying its exports.

Pakistan is still in a better position than some other nsmall countries, such as Laos, Lesotho, Mauritius and Myanmar. Global trade beyond the US will continue, but many countries will need to adapt to the new dynamics.

The writer is a senior economic reporter.