ISLAMABAD, Oct 18 (ABC): Renewed economic engagement between China and the United States is improving prospects for greater stability in international trade. As the world’s two largest economies pursue structured cooperation and reciprocal tariff reductions, businesses and investors could benefit from a more predictable trading environment.
During their September economic and trade consultations, China and the United States advanced work on the China-US Board of Trade. They also agreed on a reciprocal tariff-reduction framework covering approximately $30 billion worth of goods on each side.
According to China’s Ministry of Commerce, tariffs on around 90% of the products covered by the arrangement would fall to most-favoured-nation rates. However, both countries must first complete their domestic procedures.
These developments reflect efforts to manage economic differences through structured engagement. Greater cooperation could reduce uncertainty for international businesses while changing competitive conditions for countries trading with both economies.
China-US trade stability could benefit Pakistan
Dr Aadil Nakhoda, Chair of the Economic Advisory Group and Assistant Professor at the Institute of Business Administration, Karachi, discussed the developments with Wealth Pakistan.
He said stronger China-US economic engagement could reduce uncertainty in global trade. It could also provide greater predictability for developing economies.
According to Nakhoda, the developments are particularly important for Pakistan because of its strong commercial relationships with both countries.
China remains Pakistan’s largest source of imports, supplying machinery, intermediate goods and raw materials used by domestic industries. Meanwhile, the United States continues to be Pakistan’s largest export market.
Therefore, greater stability in China-US trade relations could influence Pakistan’s industrial production, export competitiveness and participation in international supply chains.
Nakhoda said the expansion of the China Plus One strategy had encouraged multinational companies to diversify production away from China. This shift created opportunities for alternative manufacturing locations and reshaped established supply chains.
However, Pakistan already maintains strong commercial links with China through its bilateral free trade agreement. These arrangements provide a foundation for deeper participation in Chinese production networks and global value chains.
He explained that greater stability in Chinese manufacturing and international trade could benefit Pakistani industries. In particular, businesses could gain from more predictable supplies of imported materials and closer industrial cooperation.
Pakistan needs stronger tariff and industrial policies
Nakhoda emphasised that Pakistan needed a coherent tariff and industrial strategy to benefit from improvements in the international trading environment.
“The National Tariff Policy needs to be implemented in full spirit. Rationalisation is critical,” he said.
He also called for strategic integration into global value chains. At the same time, Pakistan should strengthen product safety requirements and quality standards to meet international market expectations.
The renewed China-US engagement follows years of trade tensions that have influenced investment decisions, manufacturing locations and global supply chains.
Tariff differences between major economies have encouraged businesses to reconsider sourcing strategies and production locations. Consequently, countries seeking export-oriented investment have faced both new opportunities and competitive challenges.
A more predictable trading relationship could support longer-term decisions on production, procurement and investment. However, the benefits would differ across countries and industries.
Stable trade conditions could support Pakistani exporters
Bilal Aftab, Staff Economist at the Pakistan Institute of Development Economics (PIDE), told Wealth Pakistan that greater China-US trade stability could benefit developing economies.
He said more predictable global demand, freight conditions and supplies of industrial inputs would help businesses plan their operations.
For Pakistani exporters, stable supplies and prices of Chinese machinery, yarn and chemicals could offer particular advantages.
Many domestic manufacturers depend on imported materials to maintain production and compete in international markets. Therefore, greater stability in input costs and availability could improve business planning.
However, Aftab cautioned that closer China-US economic engagement could also create competitive challenges for third countries.
As tariffs decline on selected products, Chinese manufacturers may face less pressure to relocate production solely to secure tariff advantages in the American market.
This could reduce some opportunities previously created by trade tensions for countries such as Pakistan.
Consequently, Pakistani industries would need to compete more effectively on production costs, product quality, regulatory compliance and supply reliability.
Aftab said businesses should not depend on tariff differences between major economies to maintain their competitiveness.
Experts caution against assuming permanent trade stability
Despite the recent improvement in China-US economic relations, Aftab warned that uncertainty could return.
He noted that the Kuala Lumpur economic and trade arrangement had been extended only until January 10, 2027.
Therefore, businesses and policymakers should remain prepared for possible changes in international trading conditions.
Aftab said Pakistan should plan for managed volatility in China-US economic relations rather than assume that the recent improvement would eliminate future uncertainty.
He also stressed the importance of maintaining access to the American market through stronger regulatory compliance.
Pakistani exporters need to improve supply-chain traceability, rules-of-origin documentation and adherence to international trade requirements.
These measures are particularly important for the textile sector, which depends heavily on imported inputs while supplying international markets.
Aftab suggested that Pakistan could explore preferential textile treatment linked to purchases of American cotton. Such arrangements could create opportunities for mutually beneficial trade.
Chinese investment and export diversification offer opportunities
Aftab also called for better utilisation of Pakistan’s existing free trade agreement with China.
He said Pakistan should move beyond traditional export categories and explore opportunities in processed food, higher-value agricultural products and manufactured goods.
These products could help Pakistan expand its presence in the Chinese market and diversify its export base.
In addition, he encouraged Chinese investment in Pakistan’s special economic zones, particularly projects focused on domestic value addition and export production.
Such investment could strengthen local manufacturing capabilities, develop supplier networks and improve Pakistan’s integration into regional and global production systems.
However, he stressed that export-oriented projects must meet international rules-of-origin requirements.
Aftab identified engineering goods, technical textiles, surgical products, processed food, halal products and information technology services as promising areas for export diversification.
These sectors could help Pakistan reduce its dependence on traditional exports while expanding participation in higher-value international markets.
Industrial competitiveness remains essential
The evolving China-US trade relationship highlights the growing importance of industrial competitiveness for developing economies.
Greater cooperation between the two major economies could reduce uncertainty in international markets. However, it could also intensify competition by changing the incentives that previously encouraged companies to diversify production towards third countries.
For Pakistan, improved external trading conditions would need to be supported by domestic economic reforms.
These include reducing production costs, improving infrastructure, strengthening regulatory compliance and encouraging higher-value exports.
Both experts said renewed China-US economic engagement could create a more predictable international trading environment. Nevertheless, it would not eliminate the competitive pressures facing Pakistani industries.
They emphasised that sustainable gains would depend on stronger industrial capabilities, greater value addition, improved product standards and deeper integration into global value chains.
As China and the United States pursue more structured economic engagement, greater trade predictability could strengthen international business confidence. For Pakistan, taking advantage of these opportunities will require continued improvements in industrial efficiency, export diversification and competitiveness.
