In a significant diplomatic and economic breakthrough, Pakistan announced on Thursday that it had secured a new trade agreement with the United States that could ease tariffs and open doors for deeper investment ties—though key details remain under wraps.
While Islamabad celebrated what it described as a shift towards long-term economic cooperation, U.S. President Donald Trump drew attention to a parallel deal aimed at tapping into Pakistan’s untapped oil potential.
Trade Deal Aimed at Investment, Not Just Tariffs
The agreement follows weeks of negotiations in Washington and comes just ahead of an August 1 deadline that could have seen Pakistan slapped with a 29% tariff on its exports to the U.S.—a figure that has now been avoided. Islamabad was seeking better terms than competitors like India and Vietnam, which have faced 25% and 20% tariffs respectively under Trump’s trade regime.
Pakistan’s Finance Minister Muhammad Aurangzeb, who led the final negotiations, emphasized that the pact extends beyond tariff reduction. “This isn’t just about immediate trade relief. It’s a strategic move to integrate trade with long-term investment,” he said in a video statement.
The deal reportedly covers collaboration in several sectors, including IT, minerals, energy, and cryptocurrency—areas where Pakistan is eager to attract foreign capital.
Though Pakistani officials confirmed the agreement would bring down tariffs on its exports, particularly textiles, they did not disclose specific figures. The U.S. remains Pakistan’s top textile market, and Islamabad recorded a $3 billion trade surplus with Washington in 2024.
Trump Focuses on Oil Development Amid Uncertain Prospects
While Islamabad touted trade cooperation, President Trump highlighted a separate agreement targeting Pakistan’s energy sector. “We’ve reached a deal with Pakistan to develop their massive oil reserves,” he posted on social media. “We’re now selecting the American firm that will lead this venture.”
The optimism, however, contrasts with Pakistan’s mixed record in oil exploration. Offshore drilling efforts have repeatedly fallen short, and the country’s proven conventional crude reserves are modest—ranking roughly 50th globally with an estimated 234 to 353 million barrels.
That said, a 2015 U.S. Energy Information Administration study suggested Pakistan could be sitting on 9.1 billion barrels of technically recoverable shale oil, a resource that remains largely untapped. Development in this area could significantly impact Pakistan’s energy profile, as oil currently dominates its import bill, costing $11.3 billion in the fiscal year ending June 2025.
A Strategic Shift Away from China?
The agreements may also signal Washington’s renewed interest in reshaping its relationship with Islamabad, which has leaned increasingly on Beijing in recent years. Pakistan’s economic dependency on China, including through the China-Pakistan Economic Corridor (CPEC), has raised concern in U.S. foreign policy circles.
The Trump administration appears intent on reversing that trend. This trade and energy engagement is part of a broader push to counter Chinese influence in South Asia, particularly in countries like Pakistan that hold geostrategic significance.
While ties between Islamabad and Washington had cooled under previous U.S. administrations—especially during the Biden years, which saw strained relations over Afghanistan—Trump has aimed to reset the narrative. Notably, he has claimed credit for brokering a ceasefire between India and Pakistan in 2024, even earning a Nobel Peace Prize nomination from Islamabad. India, for its part, has denied that U.S. pressure played any role.
Looking Ahead
Though the finer details of the trade deal remain undisclosed, the broader message is clear: both Pakistan and the U.S. are keen to recalibrate their partnership. For Pakistan, it’s a chance to diversify economic alliances beyond China. For Trump, it’s another opportunity to reshape global trade on his terms.
Whether these agreements translate into tangible economic benefits—or get lost in political posturing—will depend on how quickly and effectively they’re implemented.
