New Textile Policy Cuts Cotton Tax, Faces US Tariffs

Commerce Minister Jam Muhammad Kamal revealed to the National Assembly that the government is crafting a new textile policy, poised to propose a sales tax exemption on the current 11% levy on domestic cotton production, a game-changing move for the sector. Expected to debut in the coming months, the policy seeks to bolster the textile industry and enhance its competitiveness amid global pressures. Parliamentary Secretary for Commerce Zulfiqar Ali Khan confirmed this exemption is part of a broader export strategy, with value-added goods exports surging 35% over the past five years.

The minister also tackled the recent US imposition of a 30% reciprocal tariff on Pakistani imports, currently suspended for 90 days. While exporters view this as a challenge, some see opportunities as higher tariffs hit Pakistan’s competitors in the US market. To counter this, Prime Minister has formed a Steering Committee and a working group to analyze and formulate responses, with the Ministry of Commerce collaborating with ministries, departments, exporters, and stakeholders to engage US authorities.

In Fiscal Year 2023-24, Pakistan’s exports to the US hit $5.3 billion, with imports at $2.2 billion, yielding a trade surplus of $3.1 billion. Through March 2025, exports reached $4.4 billion, imports $1.9 billion, maintaining a $2.5 billion surplus. Key exports include garments, medical instruments, and PET-bottle grade products, while imports feature cotton, iron and steel scrap, computers, petroleum products, soybeans, and almonds. The government is actively supporting exporters amid this shifting trade landscape, with the textile policy poised to ease the cotton sector’s burden via tax reforms.

Web context highlights textile exports’ 60% share in Pakistan’s total exports (web ID: 0), while posts found on X reflect mixed views—some cheer the exemption, others fear US tariff fallout. Critically, the narrative of “enhanced competitiveness” may gloss over vulnerabilities—web sources note supply chain risks, and X sentiment suggests skepticism about trade negotiations, hinting at potential economic instability if the tariff suspension ends.