Pakistan-US have concluded a much-anticipated trade deal after President Trump returned to the power for his second term. Trump, who had pitched the slogan of “Making America Great Again” in his election campaigns, introduced tariff policy against states who it deemed unfavorable to its economic interests. While looking at US’ significance for Pakistan which provides a trade surplus of $3.1 billion for its faltering economy. This crucial trade surplus has over the years played a significant role in boosting country’s economic stability. However, this stability was shaken by a proposed universal tariff of 29 percent being imposed on all countries trading with the US. This threat of tariff pushed Pakistan towards negotiation table before the announced deadline of 1st August this year. But the question remains at what price does this US tariff relief comes at?

Looking at this breakthrough deal closely which includes reduction of tariff from 29 percent to 19 percent on Pakistani goods. While US simultaneously plans of carrying out investments in Pakistan’s oil reserves and in return Pakistan providing US access to invest in its mining, energy, IT and digital infrastructure. Under the condition that Pakistan has to reduce its trade surplus by importing oil from US and also diversify its supply line.

This tariff deal comes at crucial point Islamabad as country’s economy has been struggling to deal with inflation and low foreign exchange reserves. However, this deal offers to increase economic activity in the country through creation of jobs. While some see it as more of a geopolitical in nature than an economic one as US wants to tap into Pakistan’s oil and mineral reserves. However, this deal is an indication of US’ shifting its strategy in South Asia on pretext of China’s rising influence in the region. While US has also taken interest in country’s digital market where it sees potential in near future.

Washington has showed interest in oil, minerals and crypto after Trump administration taking hold of power. The agenda for US is clear that they will pursue lucrative deals in conducting their foreign relations wherever it finds an opportunity. This new administration has made budget cuts and down sized state departments while cutting of funds from aid agencies like USAID, in order to follow the “America First Policy”. To fulfil this US has been carrying out mineral deals with Ukraine, Greenland and the DRC in line of compensation for military and economic aid that it has provided over the years.

New Delhi, a key regional player, sees this deal as a shock to its foreign policy. Despite being a major ally, in the region for the US, it has been hit with 50 percent tariffs which is double than that of Pakistan’s. Thus, making Pakistani goods more competitive in the US market allowing it to increase its market share. This is a signal for rising tensions between New Delhi and Washington as an act of rebalancing has been initiated by India.US sees India’s closeness with Russia as hurdle to its partnership and only way of influencing this close friendship is a tilt towards Pakistan.

China is also monitoring this deal closely as it has heavily invested in Pakistan under the China-Pakistan Economic Corridor (CPEC) where energy and connectivity projects have seen major investments. The plan of US investing in crude oil exploration in Pakistan could lead to certain reservations due to their strategic interest in the country. It is estimated that Pakistan holds oil reserves of two thirty-four million barrels to three fifty-three million barrels which makes it fiftieth in the world in terms of crude oil reserves.