ISLAMABAD – The accelerating momentum behind a comprehensive US–India tradedeal is reshaping South Asia’s economic and strategic landscape, withimplications that extend far beyond bilateral commerce. While Washingtonand New Delhi present the partnership as a mutually beneficial arrangementanchored in supply chain resilience and market access, the deal carriesindirect yet significant consequences for Pakistan. These consequences arenot immediate shocks but structural pressures that risk deepeningPakistan’s economic marginalisation unless countered through timely reformsand strategic recalibration.
At its core, the US–India trade engagement is part of a broader Americanstrategy to diversify supply chains away from China while strengtheningpartnerships with countries viewed as reliable long-term economic andstrategic allies. India, with its vast domestic market, expandingmanufacturing base, and growing geopolitical alignment with the UnitedStates, has emerged as a central pillar of this strategy. Preferentialtrade access, regulatory cooperation, and sector-specific agreements aresteadily integrating India more deeply into the US-led global economicframework.
For Pakistan, the most immediate impact lies in trade diversion. The UnitedStates remains one of Pakistan’s largest export destinations, particularlyfor textiles and apparel. India competes in many of the same productcategories but benefits from economies of scale, stronger branding, andincreasing compliance with US regulatory and sustainability standards. AsIndian exports gain further preferential access and logistical advantages,Pakistani exporters risk losing market share in a space where margins arealready thin and competition intense. In the absence of meaningfuldiversification, Pakistan’s export profile remains vulnerable to suchshifts.
Beyond goods, services trade is also affected. India’s dominance ininformation technology, business process outsourcing, and digital servicesis reinforced through closer US trade and technology cooperation. WhilePakistan’s IT and freelancing sectors have grown in recent years, theyoperate with limited institutional backing, weaker global integration, andinconsistent policy support. The expanding US–India partnership riskswidening this gap, making it harder for Pakistan to position itself as acompetitive alternative in high-value services.
The strategic dimension of the trade deal further compounds Pakistan’schallenges. Economic partnerships increasingly serve as instruments offoreign policy, and the US–India trade trajectory reflects a deepeningalignment that extends into defence, technology, and regional security. AsIndia’s economic importance to the United States grows, Washington’sdiplomatic calculus in South Asia inevitably shifts. Issues traditionallyraised in US–Pakistan engagement—ranging from regional stability toconflict mediation—carry less weight when Pakistan’s economic relevancedeclines.
This shift has implications for Pakistan’s ability to leverage diplomacy inmoments of regional tension. A stronger US–India economic relationshipreduces incentives for Washington to exert pressure on New Delhi overcontentious political or security issues. While the United States continuesto emphasise regional stability, its willingness to risk friction withIndia diminishes as trade and investment ties deepen.
Foreign direct investment is another area where Pakistan faces indirectfallout. US companies seeking to diversify manufacturing and sourcing awayfrom China increasingly prioritise India due to its scale, policypredictability, and explicit support from Washington. Pakistan, bycontrast, is perceived as a higher-risk environment due to macroeconomicvolatility, recurring balance-of-payments crises, and regulatoryuncertainty. Even sectors where Pakistan has latent potential—such asagribusiness, light manufacturing, and digital services—struggle to attractsustained US investment in the shadow of India’s expanding appeal.
The technology gap between India and Pakistan also risks widening. Tradeagreements today often encompass cooperation in advanced manufacturing,semiconductors, artificial intelligence, and dual-use technologies.Enhanced US–India collaboration in these areas strengthens India’stechnological base and, by extension, its defence and industrialcapabilities. Pakistan, with limited access to Western technologyecosystems, faces a growing asymmetry that has long-term economic andsecurity implications. This imbalance is not merely military; it affectsproductivity, innovation, and integration into global value chains.
Equally significant is the narrative dimension. The US–India trade dealreinforces India’s image as a stable, high-growth economy and a trustedglobal partner. Pakistan, meanwhile, continues to be associated ininternational discourse with IMF programmes, fiscal stress, and politicaluncertainty. Such perceptions influence credit ratings, investor sentiment,and the terms on which countries engage in trade negotiations. Over time,narrative disadvantages translate into tangible economic costs.
Yet the evolving regional order does not render Pakistan without options.The impact of the US–India trade deal is indirect, not deterministic.Pakistan’s response will determine whether it becomes a passive bystanderor an adaptive participant in a changing global economy. Diversifyingexports beyond traditional textiles, investing in value-added agriculture,and scaling up IT and digital services are critical steps. Equallyimportant is improving the ease of doing business through consistentpolicies, energy sector reform, and predictable taxation.
Pakistan can also deepen economic engagement with alternative markets,including China, the Gulf states, Central Asia, and Africa. TheChina–Pakistan Economic Corridor, often viewed primarily through aninfrastructure lens, holds potential as a platform for export-orientedindustrialisation if aligned with global market demands. Leveragingregional connectivity and positioning Pakistan as a transit and productionhub could partially offset losses elsewhere.
Ultimately, the US–India trade deal underscores a broader reality: globaleconomic alignments are increasingly selective, rewarding countries thatoffer scale, stability, and strategic value. For Pakistan, the challenge isnot the existence of the US–India partnership but the risk of fallingfurther behind in an increasingly competitive international system. Withoutstructural reform and strategic clarity, the gap may widen. With them,Pakistan can still carve out a sustainable, if more modest, role in theevolving global order.
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Foreign Policy, Global Trade, Strategic Affairs
Caption:As Washington deepens its economic partnership with New Delhi, Pakistanfaces growing challenges in trade competitiveness, investment flows, andregional strategic relevance.
By Staff Correspondent
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The accelerating momentum behind a comprehensive US–India trade deal isreshaping South Asia’s economic and strategic landscape, with implicationsthat extend far beyond bilateral commerce. While Washington and New Delhipresent the partnership as a mutually beneficial arrangement anchored insupply chain resilience and market access, the deal carries indirect yetsignificant consequences for Pakistan. These consequences are not immediateshocks but structural pressures that risk deepening Pakistan’s economicmarginalisation unless countered through timely reforms and strategicrecalibration.
At its core, the US–India trade engagement is part of a broader Americanstrategy to diversify supply chains away from China while strengtheningpartnerships with countries viewed as reliable long-term economic andstrategic allies. India, with its vast domestic market, expandingmanufacturing base, and growing geopolitical alignment with the UnitedStates, has emerged as a central pillar of this strategy. Preferentialtrade access, regulatory cooperation, and sector-specific agreements aresteadily integrating India more deeply into the US-led global economicframework.
For Pakistan, the most immediate impact lies in trade diversion. The UnitedStates remains one of Pakistan’s largest export destinations, particularlyfor textiles and apparel. India competes in many of the same productcategories but benefits from economies of scale, stronger branding, andincreasing compliance with US regulatory and sustainability standards. AsIndian exports gain further preferential access and logistical advantages,Pakistani exporters risk losing market share in a space where margins arealready thin and competition intense. In the absence of meaningfuldiversification, Pakistan’s export profile remains vulnerable to suchshifts.
Beyond goods, services trade is also affected. India’s dominance ininformation technology, business process outsourcing, and digital servicesis reinforced through closer US trade and technology cooperation. WhilePakistan’s IT and freelancing sectors have grown in recent years, theyoperate with limited institutional backing, weaker global integration, andinconsistent policy support. The expanding US–India partnership riskswidening this gap, making it harder for Pakistan to position itself as acompetitive alternative in high-value services.
The strategic dimension of the trade deal further compounds Pakistan’schallenges. Economic partnerships increasingly serve as instruments offoreign policy, and the US–India trade trajectory reflects a deepeningalignment that extends into defence, technology, and regional security. AsIndia’s economic importance to the United States grows, Washington’sdiplomatic calculus in South Asia inevitably shifts. Issues traditionallyraised in US–Pakistan engagement—ranging from regional stability toconflict mediation—carry less weight when Pakistan’s economic relevancedeclines.
This shift has implications for Pakistan’s ability to leverage diplomacy inmoments of regional tension. A stronger US–India economic relationshipreduces incentives for Washington to exert pressure on New Delhi overcontentious political or security issues. While the United States continuesto emphasise regional stability, its willingness to risk friction withIndia diminishes as trade and investment ties deepen.
Foreign direct investment is another area where Pakistan faces indirectfallout. US companies seeking to diversify manufacturing and sourcing awayfrom China increasingly prioritise India due to its scale, policypredictability, and explicit support from Washington. Pakistan, bycontrast, is perceived as a higher-risk environment due to macroeconomicvolatility, recurring balance-of-payments crises, and regulatoryuncertainty. Even sectors where Pakistan has latent potential—such asagribusiness, light manufacturing, and digital services—struggle to attractsustained US investment in the shadow of India’s expanding appeal.
The technology gap between India and Pakistan also risks widening. Tradeagreements today often encompass cooperation in advanced manufacturing,semiconductors, artificial intelligence, and dual-use technologies.Enhanced US–India collaboration in these areas strengthens India’stechnological base and, by extension, its defence and industrialcapabilities. Pakistan, with limited access to Western technologyecosystems, faces a growing asymmetry that has long-term economic andsecurity implications. This imbalance is not merely military; it affectsproductivity, innovation, and integration into global value chains.
Equally significant is the narrative dimension. The US–India trade dealreinforces India’s image as a stable, high-growth economy and a trustedglobal partner. Pakistan, meanwhile, continues to be associated ininternational discourse with IMF programmes, fiscal stress, and politicaluncertainty. Such perceptions influence credit ratings, investor sentiment,and the terms on which countries engage in trade negotiations. Over time,narrative disadvantages translate into tangible economic costs.
Yet the evolving regional order does not render Pakistan without options.The impact of the US–India trade deal is indirect, not deterministic.Pakistan’s response will determine whether it becomes a passive bystanderor an adaptive participant in a changing global economy. Diversifyingexports beyond traditional textiles, investing in value-added agriculture,and scaling up IT and digital services are critical steps. Equallyimportant is improving the ease of doing business through consistentpolicies, energy sector reform, and predictable taxation.
Pakistan can also deepen economic engagement with alternative markets,including China, the Gulf states, Central Asia, and Africa. TheChina–Pakistan Economic Corridor, often viewed primarily through aninfrastructure lens, holds potential as a platform for export-orientedindustrialisation if aligned with global market demands. Leveragingregional connectivity and positioning Pakistan as a transit and productionhub could partially offset losses elsewhere.
Ultimately, the US–India trade deal underscores a broader reality: globaleconomic alignments are increasingly selective, rewarding countries thatoffer scale, stability, and strategic value. For Pakistan, the challenge isnot the existence of the US–India partnership but the risk of fallingfurther behind in an increasingly competitive international system. Withoutstructural reform and strategic clarity, the gap may widen. With them,Pakistan can still carve out a sustainable, if more modest, role in theevolving global order.——————————
Foreign Policy, Global Trade, Strategic Affairs
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