Following President Donald Trump’s tariff announcement, concerns have surged in Pakistan’s business community. From market crashes to digital restrictions, the US cites internet blackouts, corruption, and restrictive trade policies as key reasons.
- Market Crash and Global Tensions Add to Pakistan’s Woes
- Import Policies and SRO Culture Under Scrutiny
- Corruption and Bribery Raise Trade Concerns
- Digital Trade Disrupted by Internet Shutdowns
Concerns are rising in Pakistan’s business community and among the public after U.S. President Donald Trump imposed new tariffs on Pakistani goods, citing unfair trade practices. The announcement triggered a sharp fall in the Pakistan Stock Exchange (PSX) and fueled rumors of a travel ban and further restrictions.
At the same time, Trump issued strong threats to Iran, and the ongoing Israel-Gaza conflict is worsening, adding to regional instability. Together, these developments have shaken investor confidence and raised fresh fears of diplomatic isolation.
Here’s a summary of the U.S. complaints as stated in the 2024 National Trade Estimate Report on Foreign Trade Barriers — and why they matter for Pakistan.
1. Internet Shutdowns and Platform Bans Disrupt Digital Trade
The U.S. criticized Pakistan’s repeated suspensions of internet services and bans on platforms like YouTube, Facebook, and Twitter (now X).
Report says:
“The United States remains concerned about restrictions on cross-border data flows and data localization requirements, including repeated suspension of mobile data and social media platforms.”
The report also highlighted that these restrictions negatively impact digital services, payments, and trade.
“Pakistan imposes barriers to digital trade, including restricting cross-border data transfers and placing limits on cloud-based services.”
2. New Data Protection Law Seen as Barrier
Pakistan passed its Personal Data Protection Act in 2023, which requires companies to store data locally and obtain special approvals for transfers abroad. The U.S. sees this as a trade hurdle.
Report says:
“Pakistan finalized the Personal Data Protection Act, which includes data localization requirements, limitations on cross-border data transfers, and local data officer requirements.”
These rules, though aimed at protecting citizens’ privacy, may discourage foreign investment in the tech sector.
3. State Monopoly in Insurance Raises Red Flags
The report criticized Pakistan’s mandatory use of the National Insurance Company (NIC) for all government-related insurance contracts, saying it blocks competition.
Report says:
“The government of Pakistan requires all government-run and many government-financed projects to use only state-owned National Insurance Company Limited (NICL) for their insurance needs, precluding private companies from competing.”
Further, the U.S. disapproved of reinsurance requirements through Pakistan Reinsurance Company (PRCL):
“Insurance providers are also required to obtain at least 35 percent of their reinsurance from the state-owned Pakistan Reinsurance Company Limited (PRCL), limiting the ability of private insurers to select providers based on price or quality.”
4. Media and Digital Regulation Laws Restrict Global Tech Firms
Laws like the e-Safety Bill and PECA give authorities sweeping powers to block or ban digital platforms without court orders.
Report says:
“The Pakistan government continues to implement and enforce laws that limit the operation of social media platforms and online services, including the Prevention of Electronic Crimes Act (PECA) and the e-Safety Bill.”
“These laws have broad provisions that allow authorities to block websites or content and require data localization, which creates uncertainty for service providers.”
This unpredictability makes tech companies hesitant to invest in Pakistan.
5. Sudden Trade Rule Changes Discourage Business
The USTR noted that Pakistan frequently uses Statutory Regulatory Orders (SROs) to change import/export rules with little notice.
Report says:
“The government of Pakistan frequently issues SROs that change import tariffs or other trade rules without prior notice, creating uncertainty and increasing business risk for traders and investors.”
Such changes affect customs duties, import approvals, and overall business confidence.
6. Corruption, Delays, and Legal Weaknesses Remain a Concern
The report again highlighted the slow legal process, corruption, and poor contract enforcement in Pakistan.
Report says:
“U.S. businesses report challenges in Pakistan’s judicial system, including lengthy delays in contract enforcement, lack of transparency, and concerns about corruption.”
These factors contribute to higher costs and risks for foreign investors.
7. Repatriating Profits Still Risky for Foreign Firms
While the law allows foreign companies to send profits abroad, the State Bank of Pakistan blocked such transfers in 2023 due to foreign exchange shortages.
Report says:
“U.S. firms report difficulties in repatriating profits from Pakistan due to foreign exchange controls and delays in obtaining required approvals.”
In 2024, some of these restrictions were lifted, but the risk remains high.
8. Restrictions on Foreign Investment in Key Sectors
The USTR pointed out that despite a new investment policy, many sectors are still restricted or require local ownership.
Report says:
“Pakistan imposes foreign equity limits and licensing requirements in key sectors, including media, aviation, agriculture, banking, and insurance, which inhibit market access.”
This discourages companies that want to expand operations in Pakistan on their own terms.
9. Complex and Unfair Tax Environment
The report criticized Pakistan’s low tax compliance, complicated tax rules, and weak enforcement — all of which hurt trade and investment.
Report says:
“Pakistan’s tax system remains complex, with multiple overlapping taxes at the federal and provincial levels, low compliance rates, and frequent audits that increase the burden on businesses.”
A weak tax-to-GDP ratio also means more pressure on compliant businesses.
Trump’s Tariff Decision: Why Now?
While the report doesn’t recommend sanctions or tariffs, President Trump used it as a basis for his recent trade action against Pakistan, citing national interest and trade fairness. His statement included accusations of unfair trade, tech restrictions, and lack of cooperation on regional issues.
Analysts believe the move is also linked to Trump’s hardline approach toward Muslim-majority nations, especially as U.S. elections approach.
Market Crash and Public Panic
Following the tariff announcement, the KSE-100 index plunged over 1,200 points, and fears of a broader crackdown — including on remittances, visas, and tech platforms — spread rapidly on social media.
“The business community is spooked. If tariffs are just the start, what’s next? Sanctions? Travel bans?” said a trader at Karachi’s stock market.
Conclusion: A Wake-Up Call for Pakistan
The USTR report offers detailed feedback that can help Pakistan rebuild global investor trust — if acted upon seriously. Key areas for reform include:
- Freeing up the internet and digital trade
- Ensuring legal and policy stability
- Opening key sectors for investment
- Streamlining taxes and customs
- Guaranteeing foreign firms’ rights
Until then, tariffs and diplomatic friction may become the new normal — with serious consequences for Pakistan’s economy and global image.