Trump's China Tariffs Helping Pakistani Garments Exports to America
|Textile Exports to United States. Source: Bloomberg
American buyers are diversifying their supplier base away from China, the No. 1 exporter of these goods to the U.S. Already, Bangladesh is close to snatching the trousers-to-towel crown, according to Bloomberg News. Pakistan, at No. 6 last year, has grown its own shipments to the U.S. by almost 12% this year. It may overtake India, which has seen virtually no improvement.
|Pakistan's Real Effective Exchange Rate (REER). Source: Bloomberg
Pakistani apparel exports are becoming more competitive in international markets because Pakistani rupee has declined by almost 25% recently. This has wiped out the currency’s overvaluation adjusted for inflation differences with trading partners, as estimated by the IMF.
Textiles industry is just one the export industries seeing exodus of manufactures and buyers from China. Electronics industry is seeing similar moves. Engadget is reporting that Google is moving production of its US-bound Nest thermostats and motherboards to Taiwan. The Wall Street Journal has reported that Nintendo is shifting at least some production of its Switch console to Southeast Asia.
Last November, Nomura Securities strategists had said they expected Malaysia, Japan and Pakistan to be the top 3 beneficiaries of import substitution triggered by US-China trade war escalation. Nomura's analysis is based on detailed study of 7,705 items which will be subject to tariffs and counter tariffs by US and China if the stand-off continues. Nomura developed two indices as part of its research on the subject: NISI (Nomura Import Substitution Index) and NPRI (Nomura Production Relocation Index).
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