March 5, 2025
ISLAMABAD – Washington’s chainsaw to the old order may look terrifying from the outside, but if Pakistan uses this as the impetus to unleash its own process of creative destruction, the country can find its footing in a rapidly changing global landscape.
In recent weeks, the Trump administration has mounted an aggressive effort to reshape the post-Cold War world order. The foundational belief driving this shift is that access to the American market — and the broader international system aligned with the United States — is a privilege, not a right.
For far too long, the Trumpian view holds, adversaries and allies alike have been free riders taking advantage of the United States. Times have changed, and so has the thinking. America must change its strategic approach and be much more transactional — and ruthless — in its dealings with the rest of the world.
This is a major shift from a neoliberal policy — pushed by Democrats and Republicans alike — where the free movement of trade, capital, and people were seen as being good things in and of themselves. In addition, the view was that American influence largely was derived through the provision of global public goods. The Trump administration does not subscribe to these beliefs, and it sees access to American markets, capital, and security as a point of leverage through which the United States can and must demand certain strategic and economic concessions from both friends and foes.
Tariffs are the most visible and broadly discussed part of this new strategic approach. By slapping tariffs on countries that do not align closely with Washington’s priorities, the White House has effectively raised the price of entering the American market. If countries want a lower price, then they must also lower the barriers that prevent American businesses from fairly competing in and taking advantage of market opportunities on their own turf. And if this is not possible, then other concessions in the strategic and national security domains must be made.
The message is clear: if you want access to US consumers and businesses, you must be willing to strike what President Trump considers a fair deal, whether it pertains to trade, economics, or national security.
Recent cases demonstrate Washington’s new approach to making deals. Take, for instance, the administration’s move to pressure Mexico into tightening border security by threatening tariffs if American demands were not met. In another example, critical mineral deals with Ukraine highlight how Washington is seeking to lock in supply chain advantages for key resources in return for continued strategic support. These actions underscore that the administration sees a world where America extracts tangible benefits — geopolitical or economic — in exchange for the privilege of trading with and being integrated into its market.
At the same time, Trump and his officials — led by Elon Musk — are taking an axe to the institutions that have executed the old ways of doing business with the world. Whether this would be an effective strategy remains to be seen, but the reality is that institutions, bureaucracies, and personnel that continue to operate from the old playbook of American engagement are no longer welcome.
Where does Pakistan stand?
For Pakistan, this development poses both a serious threat and a historic opportunity. On the one hand, the threat is clear: Pakistan depends heavily on exports to the United States and relies on bailouts from American-led institutions such as the International Monetary Fund (IMF) and the World Bank. As the Trump administration’s policies disrupt these institutions — sometimes even calling into question their future relevance —Pakistan’s reliance on IMF packages and other forms of international financing becomes increasingly precarious.
Khurram Husain pointed this out in a recent article as well, arguing that without institutions like the IMF and World Bank providing access to capital, “Pakistan will not be able to pay the bills for its overdeveloped state apparatus and its consumption-driven economy built on outmoded technology.”
Khurram is right. The old model, in which Islamabad occasionally stumbles into a crisis and then negotiates a bailout with the IMF, can no longer be taken for granted in a world where the very pillars of the global order are undergoing a radical shift.
This volatility, however, also presents a historic opportunity for Pakistan as these once-in-a-century changes give the country an opening to shape both the external and internal environment influencing its political economy. For decades, Pakistan has relied on tariff and non-tariff barriers that effectively pick winners and losers in its economy — often protecting inefficient sectors at the expense of competitiveness and innovation. Such barriers, in practice, are a tax on exports. They raise input costs, hamper Pakistani firms from scaling up, and dissuade entrepreneurs from venturing into global markets.
As American tariffs increasingly take a reciprocal shape and international financial institutions face volatility, Pakistan faces severe headwinds. But these can be averted through measures that engage in creative destruction at home.
The need for creative destruction
The first target of this creative destruction must be tariff and non-tariff barriers that have stifled market forces in the country. By doing away with these barriers radically and across sectors, a new, more open economic model can be developed. This is all the more important as a strategic approach in a world where the United States is keen to take a transactional approach to its trading relations with the world, primarily focusing on trade deficits and barriers as a starting point for bilateral negotiations.
Of course, removing barriers is far from sufficient on its own. Other structural reforms — especially those that address the longstanding issues of high energy costs for industry and the overall ease of doing business — are essential complements. Pakistan’s high cost of energy hobbles its manufacturing sector and cumbersome regulations deter entrepreneurs from scaling up or even starting new ventures.
Tackling these issues also creates tailwinds in terms of getting attention from the Trumpian forces reshaping the American and global economy. In addition, wholesale reform of institutions that unleash market forces is critical to attracting capital in order to modernise the economy, something which a Trump administration may want to enable in cases where partner countries are seen as being aligned with their priorities.
For starters, Pakistan should seek to push through these changes in particular sectors that can bolster trade with the United States — this would be critical in preventing undue turbulence in the bilateral relationship. India, for example, has adopted a similar approach, reducing import tariffs in a variety of important sectors for the United States, including motorcycles.
The shift in Washington’s approach is also an opportunity for Pakistan to rebalance strategic parts of its economy as well. These parts have increasingly become dominated by China in recent years — a particular risk for a country that relies on access to Western markets and capital to stay afloat.
Pakistani policymakers argue time and time again that they do not want to choose between the United States and China as the strategic rivalry between the two powers heats up. This is the right approach, but executing on this strategy requires ensuring that China does not by default dominate key sectors.
As a result, Pakistan must make tangible efforts to align with American companies in three key sectors: critical minerals, telecommunications, and emerging technologies. In critical minerals, Barrick’s operations at Reko Diq provide a blueprint for attracting other western companies in the mining space; in telecommunications, the Starlink licensing process should be accelerated and completed; and in terms of emerging technologies, Pakistan must devise a regulatory and legal framework that positions the country as having a pro-innovation hub.
Critics of this approach would argue that Pakistan’s domestic realities make the recommended approach dangerous. However, Pakistan is in need of urgent reform precisely because of the country’s fragility. For far too long, the country has ignored mounting pressures for reform and, as a result, fallen behind its peers over the decades. Missing an opportunity to engage with global shifts — particularly those led by the United States — risks further decline. By preemptively aligning with emerging global norms, Pakistan can secure the breathing space and external support needed to strengthen its institutions, rather than letting them collapse under the weight of an outdated economic model.
The idea is to pursue targeted and strategic reforms that improve competitiveness and rebalance Pakistan’s growing dependencies. The worsening external financing and debt servicing needs have already severely curtailed Pakistan’s sovereignty — failure to adjust to a new world order risks losing access to crucial markets and capital, potentially forcing even greater concessions under far less favourable terms in the future.
This approach also aligns with Pakistan’s historical relationship with the United States, which has been transactional at best. In an era where Washington is openly transactional, Pakistan once again has an opportunity to find new areas of potential alignment with Washington. But taking advantage of this moment requires policymakers in Pakistan to abandon their old playbook of doing business.
The global order, shaped by the Trump administration and possibly by future administrations that share its worldview, is moving swiftly. In this environment, business as usual poses serious risks for Islamabad and waiting passively for conditions to improve is a road to disaster.
The biggest problem for Pakistan, though, is that the executors of this potential shift are likely to be the same bureaucratic and institutional structures that are beneficiaries of the status quo political economy. To change course, the first disruption that has to occur is at this institutional level because the structure of governance and bureaucracy that has developed in Pakistan over the decades is incapable of imagining a different reality and bringing it to fruition.
Finally, it goes without saying that without political stability and the rule of law, none of these things are going to work. International investors and capital are never going to sustainably flow into a country where domestic investors and ordinary citizens alike are unsure about the security of life, property, and contracts, and where policies change on a whim.
Pakistan’s policymakers need to see this moment for what it is: an opportunity to align the country’s economic architecture with a world where competitive advantage wins out over protectionism. By embracing lower tariff barriers, pursuing market reforms, and removing cumbersome regulations, Pakistan can position itself as a credible trade partner and investment destination.
It is precisely in moments of upheaval that strategic clarity can emerge. Washington’s chainsaw to the old order may look terrifying from the outside, but if Pakistan uses this as the impetus to unleash its own process of creative destruction, the country can find its footing in a rapidly changing global landscape.
In this new era, action, not hope, should be the order of the day.
Uzair Younus is a Principal at The Asia Group, where he advises global companies on developing and executing strategies to align their business strategy with public good needs across South Asia. He is also host of the podcast Pakistonomy.”