Pakistan, US sign landmark trade deal to slash tariffs and explore oil reserves

Defence affairs - political analysis

In a major breakthrough, Pakistan and the United States have finalised a landmark trade agreement aimed at expanding bilateral trade, enhancing market access, encouraging foreign investment, and deepening economic cooperation across key sectors including energy, minerals, IT, and cryptocurrency.

The agreement was concluded during a high-level meeting in Washington, DC, where Federal Finance Minister Senator Muhammad Aurangzeb met with US Secretary of Commerce Howard Lutnick and US Trade Representative Ambassador Jamieson Greer. Also present were Pakistan’s Secretary of Commerce Jawad Paul and Ambassador Rizwan Saeed Sheikh.

According to a press release from Pakistan’s Ministry of Finance, the deal includes reciprocal tariff reductions—particularly benefiting Pakistani exports—and lays the foundation for joint exploration of natural resources, especially oil reserves.

US President Donald Trump confirmed the agreement via a post on Truth Social, stating that both countries will collaborate in selecting an oil company to lead the exploration. He added, "Maybe Pakistan will one day sell oil to India."

The deal is expected to stimulate US investment in Pakistan’s infrastructure and development projects while giving Pakistani goods greater access to American markets. It also aligns with Pakistan’s broader objective of diversifying economic ties with US states individually.

Finance Minister Aurangzeb emphasized that the agreement addresses long-standing trade issues such as non-tariff barriers and imbalances.

As part of its commitment, Pakistan also rolled back a 5% tax on foreign digital services that had been introduced a month earlier—a move seen as a goodwill gesture toward the US While this exemption benefits all foreign companies, it was reportedly granted in response to US concerns.

The agreement comes at a time when US-India trade tensions are escalating. President Trump recently announced a 25% tariff on Indian goods starting August 1, citing India’s high trade barriers and continued defense ties with Russia. He also halted plans for a Tesla manufacturing plant in India and issued a stern warning to Apple regarding its offshore production.