As Donald Trump secures a second term as President of the United States, analysts are increasingly focused on the potential economic ramifications for countries like Pakistan. Shabbir H. Kazmi from Eurasia Review notes that Trump's victory is expected to significantly impact global geopolitics and commodity prices, with a high probability of a Republican 'clean sweep' in both the Senate and House [2d2fafee].
Kazmi argues that Trump's policies could lead to inflation in the U.S. and negative growth globally. However, there is a potential silver lining for Pakistan: if conflicts in Ukraine and Gaza de-escalate, oil prices could stabilize around $70 per barrel, which would benefit Pakistan's import-dependent economy [2d2fafee]. Currently, Pakistan meets nearly 85% of its energy needs through imports, making it particularly vulnerable to fluctuations in oil prices. Osama Rizvi from Business Recorder emphasizes that Trump's policies could exacerbate inflationary pressures worldwide, worsening Pakistan's trade deficit, which stands at approximately $25 billion [88ad90a0].
The implications of Trump's economic policies extend beyond oil prices. His proposed import tariffs could lead to global inflation and a stronger U.S. dollar, further complicating Pakistan's economic landscape. Rizvi highlights that high U.S. interest rates could increase debt-servicing costs for Pakistan, which is already grappling with food inflation reaching around 38% [88ad90a0]. Kazmi projects that average inflation in Pakistan could stabilize at around 9%, with the State Bank of Pakistan potentially cutting rates to 11% by June 2025 [2d2fafee].
Moreover, the ongoing tensions between the U.S. and China could pose challenges for the China-Pakistan Economic Corridor (CPEC) Phase 2, which is crucial for Pakistan's economic development. However, Kazmi suggests that there may be an increase in Chinese Foreign Direct Investment (FDI) in Pakistan, contingent upon a stable policy environment that would attract Chinese investors [2d2fafee].
As the election date approaches, the potential economic fallout from a Trump presidency is becoming a focal point for policymakers and analysts, not just in Pakistan but globally. The contrasting views on Trump's policies underscore the urgent need for countries to prepare for the potential fallout, advocating for proactive measures to safeguard their economic interests in an increasingly uncertain global landscape. The upcoming Federal Reserve meeting on November 7, 2024, will be critical for Pakistan's economic outlook, as high U.S. interest rates could strengthen the dollar, leading to increased debt-servicing costs for Pakistan [88ad90a0].