‘Limited options’ for Pakistan to circumvent US punitive tariff on Iran

After US President Donald Trump announced a 25 per cent tariff for any country doing business with Iran, Pakistan has limited options available, but none of them are without consequences.

The announcement from President Trump came at a time when protests were raging in the Islamic Republic amid a severe crackdown, resulting in the death of at least 500 people, as per a rights monitor.

The statement marked a sharp escalation in Washi­n­gton’s long-running campaign of economic pressure against Iran.

Issued via social media and declared “effective immediately”, the statement by President Trump seeks to recast tariffs not as a trade remedy but as an instrument of foreign policy enforcement, with global reach and few visible limits.

The language of the post is categorical. Any country that maintains commercial ties with Iran, regardless of scale or sector, would see its exports to the US penalised.

This is not a sanction in the conventional sense. Iran is already subject to extensive American restrictions. Instead, it is a secondary measure aimed squarely at third countries, forcing them to weigh their economic engagement with Tehran against continued access to the US market.

Pakistan is also in a bind due to the latest Trump move. Its bilateral trade with Iran, estimated at around $3 billion annually, has grown steadily and is often conducted through barter or local currency arrangements, reflecting both sanctions constraints and Pakistan’s own dollar shortages. At the same time, the US remains a major export destination and a key player in Pakistan’s external ties.

A 25pc tariff layered onto existing US duties would directly affect Pakistan’s key exports, particularly at a time of economic fragility, while a sharp reduction in trade with Iran would have implications for energy supply, border economies and regional connectivity. Pakistan has limited options to circumvent this “final and conclusive” order by the US president.

With the possibility of exemptions almost non-existent, Islamabad can either attempt to further informalise trade with Iran or scale back engagement at a domestic economic cost. But none of these choices is without consequence.

The US move fits squarely within Trump’s revived “maximum pressure” doctrine, first deployed after Washington’s withdrawal from the Iran nuclear deal in 2018. Then, the emphasis was on financial isolation through banking sanctions and oil export restrictions. Now, the pressure is being extended through tariffs, shifting the burden from firms and banks to entire national economies.

Yet the announcement leaves critical questions unanswered. The most basic concern is the definition of “doing business.” The phrase is left deliberately broad. It could be read to include all forms of trade, investment, services or financial interaction, without any threshold or exemption. There is no explanation about whether humanitarian trade, such as food and medicine, is excluded, nor whether legacy contracts or indirect transactions would be treated differently.

Equally unclear is the scope of “any and all business being done with the United States.” Tariffs under US law apply to imported goods, not services or capital flows. If interpreted narrowly, the measure would still raise effective tariff rates significantly for countries trading with Iran, some of whom are already subject to existing duties. If interpreted expansively, it would push beyond established legal authority and invite domestic and international challenges.

The question of currency is ano­ther unresolved issue. The statement makes no reference to dollar-denominated transactions. In practice, this suggests that the tariff threat is not linked to the use of the US financial system but to trade access itself. That distinction matters.

Over the past decade, Iran and its trading partners have increasingly relied on non-dollar mechanisms, including barter and local currencies, to bypass financial sanctions. Apparently, the new tariff tied to US bound exports would apply regardless of how Iran-related trade is settled, reducing the effectiveness of such workarounds but at the same time reinforcing incentives to diversify away from the US market.

Blanket tariff

What distinguishes this move from previous sanctions regimes is its breadth. Traditional secondary sanctions target specific entities, allowing governments to compartmentalise compliance. A blanket tariff applied at the country level removes that flexibility. Even minimal or symbolic trade with Iran could, in theory, trigger penalties on entirely unrelated exports to the US. This transforms sanctions from a targeted tool into a form of collective economic pressure.

For Iran, the likely impact is further economic contraction. The country is already grappling with inflation, unemployment and currency depreciation — conditions that have underpinned recent unrest. Reducing its remaining trade channels may deepen these pressures, with consequences felt most acutely by ordinary citizens rather than the Iranian state apparatus.

International reaction is still taking shape, but fault lines are already visible. China, Iran’s largest trading partner and principal buyer of its oil, has openly rejected what it describes as unilateral coercion. Compliance would come at a strategic and economic cost that Beijing appears unwilling to bear.

Other partners, including India, Turkiye and Gulf states, face more complex calculations, balancing exposure to the US market against regional and energy considerations. The European governments, long critical of extraterritorial US measures, are likely to view the move as another erosion of multilateral trade norms, even if their response remains muted.

For now, Islamabad appears to have settled on a strategy of watchful waiting. None of the relevant quarters were prepared to offer an on record assessment of the announcement, reflecting the sensitivity and uncertainty surrounding its possible implementation. Despite repeated requests for comment, officials remained circumspect, privately acknowledging the risks of premature positioning. As one senior officer put it bluntly, “why should we stick out our neck?”

Published in Dawn, January 14th, 2026

from Dawn - Home https://ift.tt/JW07tVe