The 2025 US-Pakistan Trade Deal: Economic Opportunities and Geopolitical Implications for South Asia

Abstract

Concluded on July 31, 2025, the U.S.-Pakistan trade agreement indicates the new course in the foreign policy of Islamabad, both in terms of economic recovery and strategic repositioning. The deal is being hailed as historic by the Pakistani Prime Minister, Shehbaz Sharif, and futuristic, with the expectation that the U.S. and Pakistan will work together to develop unexploited oil fields and a significant cut in the U.S. tariffs on Pakistani exports. The deal addresses the Pakistani burden of importing oil worth 11.3 billion dollars and gives Pakistan a window to purchase some U.S. oil for the first time. Strategically, the agreement strengthens Pakistani relations both with the U.S and China, giving it a high status during the great power rivalry. It also provides Washington with a new grip in South Asia and can potentially counter the rise of India's influence regionally. Although Pakistani authorities deny having a zero-sum approach, the deal has worsened Indo-U.S. relations, especially after Washington had imposed a 25% tariff on India over its relations with Russia. The article proposes an in-depth discussion on the agreement by presenting the case that it is a potential economic jackpot, as well as a diplomatic achievement of Pakistan, subject to the successful navigation of multiple alliances and the domestic politico-economic stability of the country.