Published August 29, 2025
Pakistan’s economy is buzzing with optimism, thanks to a game-changing trade deal with the US finalized on July 31, 2025. This agreement, slashing tariffs and opening doors for textiles, agriculture, and IT exports, is a big win for Pakistan. General Asim Munir’s diplomatic hustle played a key role in sealing this deal, putting Pakistan on a path to growth. Meanwhile, India’s trade talks with the US have hit a wall, with crippling 50% tariffs threatening its massive export market. Both countries are battling devastating floods, but Pakistan’s strategic edge, driven by Munir’s efforts, gives it a leg up in this high-stakes economic race.
Why Pakistan’s 2025 US Trade Deal Is a Big Deal
Imagine a deal that could supercharge Pakistan’s economy—that’s exactly what happened on July 31, 2025, in Washington, D.C. Finance Minister Muhammad Aurangzeb and Foreign Minister Ishaq Dar, alongside US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick, signed a pact that cuts US tariffs on Pakistani goods—like textiles, leather, surgical instruments, IT services, and farm products—from a hefty 29% to a competitive 19%. Pakistan sweetened the pot by dropping a 5% digital services tax, welcoming US tech giants. This move is set to boost Pakistan’s $5.44 billion US export market, which already grew 10% from July 2024 to February 2025.
But there’s more: the deal dives into energy, mining, IT, and even cryptocurrency, with a focus on tapping Pakistan’s oil reserves in Balochistan and Sindh. President Donald Trump, shouting out the deal on Truth Social, sees Pakistan as a rising energy player, with plans for a US company to lead exploration transparently. The Lahore Chamber of Commerce & Industry (LCCI) is thrilled, pointing to a 978-point Pakistan Stock Exchange (KSE-100) surge and new jobs as proof of the deal’s impact.
General Asim Munir, Chief of Army Staff, was the unsung hero here. His June 2025 US trip, including a rare White House meeting with Trump, rebuilt trust after years of rocky ties. Prime Minister Shehbaz Sharif credits Munir’s diplomatic push for paving the way for this economic milestone.
India’s US Tariff Crisis: A Costly Stumble
While Pakistan celebrates, India’s facing a trade nightmare. On August 6, 2025, President Trump slapped a 25% tariff on Indian goods, followed by another 25% on August 27, totaling a brutal 50%. Why? India’s ongoing Russian oil purchases didn’t sit well with the US. These tariffs are shaking India’s $87.3 billion US export market, hitting textiles, electronics, gems, and seafood hard.
It all started with hope during Prime Minister Narendra Modi’s February 13, 2025, Washington visit, where the US-India COMPACT initiative aimed for $500 billion in trade by 2030. India offered to cut tariffs on 90% of its 12,000 tariff lines, but talks collapsed over US demands for dairy and GM crop access—non-starters for India’s sensitive farming sector. The fallout leaves India in a rare group without a US trade deal, alongside Brazil, straining ties and risking 2 million jobs, especially in textiles. India’s leaning harder on Russia and China isn’t helping its case with the US.
Pakistan’s Economy: On the Rise in FY2026
Pakistan’s economy is looking solid as it kicks off FY2026, according to the Finance Ministry’s Monthly Economic Update and Outlook (August 2025). Here’s the rundown:
- Manufacturing: Large-Scale Manufacturing (LSM) is bouncing back, up 4.1% in June 2025, thanks to cars and fertilizers, though FY2025 saw a slight 0.74% dip.
- Agriculture: Farmers got a 16.3% boost in credit to Rs. 2,577.3 billion in FY2025, and machinery imports soared 123.9% to $14.4 million in July FY2026. Kharif season urea use rose 2%, but DAP dipped 0.7%.
- Trade and Remittances: July FY2026 exports jumped 16.2% to $2.7 billion, imports rose 11.8% to $5.4 billion, shrinking the current account deficit to $254 million from $348 million. Remittances are a lifesaver, easing trade pressures.
- Inflation and Policy: Inflation’s expected at 4.0–5.0% in August 2025, with a stable rupee and State Bank rate cuts. Revenue surged 42.5% to Rs. 9,763.8 billion in H1 FY2025.
The Uraan Pakistan plan, launched in 2024, is driving this momentum, aiming for 6% export-led GDP growth by 2028 through energy, tax, and state-owned enterprise reforms. Foreign investment (FDI) rose 20% in H1 FY2025, with Aramco and Samsung jumping in. Remittances hit $35 billion, flipping a $1.8 billion deficit into a $682 million surplus for the first seven months of FY2025. The Roshan Digital Account pulled in $9 billion, boosting reserves. Source: Finance Ministry.
Floods and Global Trade: Challenges for Both
Floods are hitting both Pakistan and India hard. In Pakistan, since June 2025, over 739 lives have been lost, with crops in Punjab and Khyber Pakhtunkhwa taking a beating, threatening food supplies and budgets. India’s monsoon floods are piling onto its tariff troubles, with crop and infrastructure damage adding to the pain.
Global trade’s shaky too. The WTO’s 2025 forecast is down to 0.9% from 2.7%, thanks to US protectionism. Pakistan’s 19% tariff rate beats India (50%), Bangladesh (20%), and Vietnam (20%), but staying competitive means innovating. India’s scrambling with EU, UK, and Maldives trade talks to offset $130 billion US losses, but it’s a slow climb.
Some doubt Pakistan’s deal will deliver, citing small oil reserves and Balochistan’s security issues. In India, Modi’s standing firm for farmers, but cozying up to Russia and China could backfire with the US.
Pakistan’s Edge vs. India’s Trade Pivot
India’s fighting back, with Modi hitting Japan and SCO-China summits, plus a new UK trade deal and EU/Maldives talks, to cover $130 billion US losses. But 50% tariffs threaten textiles (2% of India’s economy) and its China-alternative manufacturing pitch, with a projected 0.3% GDP drop in FY2025-26.
Pakistan, thanks to Munir’s diplomatic groundwork, is in a stronger spot. The 19% tariff rate and energy/IT partnerships give it a regional advantage. While floods and global trade risks loom, Pakistan’s US alignment contrasts with India’s struggles, setting the stage for economic growth.