Textile sector concerned after Trump's election

Say if dollar weakens Pakistani textile products may be expensive for American buyers

Farhan Zaheer November 10, 2016
With the ongoing energy crisis, Aptma is looking to protect around 15 million textile workers, which are directly or indirectly attached with the industry. PHOTO: FILE

KARACHI: The shocking result of the US presidential election has generated a little bit of anxiety among Pakistani textile exporters who believe political uncertainty in the US may harm their exports.

“The current situation indicates that the dollar may weaken in the short term, which will negatively affect Pakistani textile exports to the US,” JS Global Capital Head of Research Syed Atif Zafar told The Express Tribune.

Undeterred by Trump’s victory, Pakistan remains positive

Pakistan’s total exports to the US in fiscal year 2016 stood at $3.5 billion out of which 83% were textile exports ($2.9 billion). The country’s textile exports to the US make up 23% of the total annual textile exports.

Analysts say the unexpected election results have sent shock waves across global financial markets, resulting in major changes in almost all world currencies against the dollar.

In case the dollar weakens, it will result in appreciation of the Pakistan rupee, making Pakistani textile products expensive for American buyers.

However, unlike Brexit, this time market watchers say the situation is much calmer and the statements of president-elect Donald Trump may not affect the trade relations of US with other trading partners.

“It’s too early to predict anything. However, the situation is not that uncertain because a large number of textile exporters of Pakistan have long term supply contracts in the US, which means that the exports are not going to be affected significantly,” added Zafar.

Analysts say investors are moving towards safe-haven assets such as Japanese yen and gold because they anticipate at least short term shocks for the US economy.

Pakistan Apparel Forum Chairman Muhammad Jawed Bilwani commented that Donald Trump had vowed to terminate major US trade agreements in his campaign to protect American trade interests.

“Though chances are low, but if he ends up terminating any major trade pact it will result in chaos and this may hit Pakistan’s textile exports,” he added.

A blessing in disguise for Pakistan?

Pakistan’s textile exports, after reaching a recent high of $13.7 billion, have been declining ever since, clocking in at $12.5 billion in fiscal year 2016. Textile sector’s disappointing performance is a result of multiple factors including an overvalued currency, which has rendered them uncompetitive internationally.

Trump has vehemently proposed protectionist trade policies by threatening to rip up US trade agreements and suggested imposing punitive tariffs on goods from various countries (mainly China and Mexico) in order to create more jobs in the US.

Published in The Express Tribune, November 10th, 2016.

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