Pakistan’s economy remains deeply entwined with global markets, yet its trade profile is heavily skewed towards a few partners. In 2023, Pakistan’s largest export destination was the United States, accounting for 17.4% of its exports (about $5.01 billion), followed by China at 9.5% ($2.74 billion). This pattern reflects Pakistan’s historical linkage to both Western and Eastern markets.
At the same time, traditional regional trade with India has been all but frozen: Islamabad officially suspended bilateral trade in 2019, reducing two-way trade from $2.4 billion in 2018 to roughly $1.2 billion by 2024. This concentration of trade raises strategic questions for Pakistan. Facing chronic deficits and repeated balance-of-payments crises, Islamabad has increasingly sought to “rebalance” its trade strategy – seeking new markets and negotiating better terms with existing partners.
Pakistan’s heavy reliance on China for imports and investment has defined much of its economic strategy in recent years. Since the launch of the CPEC in 2015, China has become Pakistan’s largest trading partner and primary source of investment. In 2024, bilateral trade reached an estimated $23.1 billion, but the relationship is highly asymmetrical: Chinese exports to Pakistan were about $20.2 billion, versus only $2.8 billion of Pakistani goods going to China.
Under the 2020 expansion of the China–Pakistan Free Trade Agreement, China agreed to eliminate tariffs on many Pakistani items (like cotton yarn, leather, and nuts) while Pakistan cut duties on Chinese industrial goods (machinery, chemicals, etc.). Yet even with these concessions, Pakistani officials note that China’s annual imports (about $2 trillion) far outstrip Pakistan’s meagre $3 billion in exports to China.
This vast imbalance has prompted Islamabad to press China for deeper market access. In late 2025, Pakistan’s planning minister, Ahsan Iqbal, urged Beijing to grant Islamabad “ASEAN-level” tariff treatment – the same low-duty access China gives its Southeast Asian Free Trade Agreement partners – so that Pakistani exports can compete more effectively.
By contrast, Pakistan’s economic ties with India offer a very different picture. Bilateral trade was growing modestly before 2019 – for example, India’s exports to Pakistan were $1.92 billion in 2017–2018 – but political tensions have all but severed formal commerce. In early 2025, India reported exports of about $447.7 million to Pakistan, while Pakistani exports to India were negligible (about $420,000).
Many Pakistan observers see untapped potential in reviving India trade, if politics permit. A 2024 analysis notes that ending punitive duties and restoring market access might boost Islamabad’s exports by up to 80%, providing a much-needed stimulus to a volatile economy. Improved Pakistani access to Indian agricultural and industrial inputs could also help alleviate domestic shortages and dampen inflation.
By deepening ties with Washington, from military cooperation to commerce, Pakistan hopes to gain alternatives to Chinese investment and to leverage US influence to advance regional peace
This prospect has gained some traction: Pakistan’s finance minister Ishaq Dar has acknowledged the “high costs” of buying Indian-origin goods through indirect routes and said the government would “seriously examine” normalising trade with India. Nevertheless, powerful security-minded actors within Pakistan remain cautious. Until mutual trust and political issues (such as Kashmir) are addressed, substantive trade liberalisation with India is unlikely. Still, even incremental steps – like reducing tariffs or re-opening selective border markets could be part of Pakistan’s broader strategy to rebalance regional ties.
Meanwhile, Pakistan’s ties with the United States offer a third set of options. Though smaller than Pakistan’s Asian trade, the US market is already Pakistan’s biggest export destination by value. In 2024, US data show Pakistan’s exports to the United States at roughly $2.1 billion and imports from the US at $5.1 billion, reflecting a wide US trade deficit. Given recent global shifts, Washington now sees economic engagement as a way to balance China’s influence in South Asia. Pakistan has thus pursued a bilateral trade agreement with the US to lower tariffs and open the energy and agricultural sectors.
Negotiations with the US fit Islamabad’s hedging strategy. Pakistan’s leaders emphasise that they do not seek an exclusive alliance with any great power: as Foreign Minister Dar put it, the US is a “long-standing friend” while China remains a “strategic partner,” and Pakistan’s policy “is not a zero-sum game.” By deepening ties with Washington, from military cooperation to commerce, Pakistan hopes to gain alternatives to Chinese investment and to leverage US influence to advance regional peace (for example, US mediation in India–Pakistan ceasefires).
This shift has already moved markets: a recent news report noted that Pakistani stock markets hit record highs amid “warming US–Pakistan ties” and prospects of relief from an IMF programme, linked in part to the new trade deal and improved US relations. Still, Pakistan’s capacity to rebalance trade toward the US is limited by geography, product competitiveness, and political goodwill. Achieving significant gains will require Pakistani manufacturers to meet stringent US standards and for American firms to take an interest in Pakistani sectors.
Looking ahead, Pakistan’s broader strategic options involve diversification and integration. Recognising the risks of over-reliance on any single partner, Islamabad’s new trade policy frameworks explicitly aim to broaden the export base and reduce vulnerabilities. The government’s Strategic Trade Policy Framework (2020–25) targets 18 priority sectors from IT services to processed foods to achieve a “dynamic, globally competitive export-driven economy.”
Pakistan is also reaching out to other markets: expanding trade ties with Middle Eastern (Gulf) countries, reviving commerce with Central Asian neighbours, and even seeking observer status in Asia-Pacific trade blocs. Efforts include renegotiating Pakistan’s membership terms in the Belt & Road’s CPEC 2.0, pursuing tariff liberalisation, and inviting Chinese and foreign firms to relocate manufacturing to Pakistan. These measures are meant to make Pakistan an export hub, not just an import market.
No single solution will rebalance Pakistan’s trade overnight. But by engaging flexibly with China (by securing better terms under CPEC), cautiously testing India (to relieve critical shortages), and reinvigorating ties with the US (through a new trade pact), Pakistan can gradually shift toward a more balanced and stable trade portfolio. Such a strategy would help stabilise the economy and provide Pakistan with greater diplomatic leverage.