**India Halts Trade with Pakistan Following Pahalgam Terror Attack**
**Meta Description:** India suspends trade with Pakistan after a terror attack, but demand for goods may continue through indirect channels, raising costs and complicating supply chains.
**URL Slug:** india-pakistan-trade-suspension-pahalgam-attack
**Headline:** India Suspends Trade with Pakistan After Pahalgam Terror Attack: Implications and Future Outlook
In the wake of a recent terror attack in Pahalgam, India has officially ceased all trade with Pakistan, heightening existing tensions between the two nations. This decision, as reported by the Global Trade Research Initiative (GTRI), is anticipated to halt only formal trade, while demand for goods is expected to persist. Pakistan may seek to acquire Indian products indirectly through third countries, albeit at increased costs.
Trade relations between India and Pakistan have been fraught since the Pulwama attack in February 2019, which led India to revoke Pakistan’s Most Favoured Nation (MFN) status and impose a hefty 200% duty on imports from its neighbor. GTRI noted, “In short, border closures halt formal trade—but not demand. Pakistan will continue sourcing Indian goods, just at a higher cost and through third countries.”
In retaliation, Pakistan suspended all bilateral trade with India by August 2019. Since then, formal trade has been largely suspended, with only a few humanitarian exports from India, primarily medicines, permitted. Despite this trade freeze, official data indicates that India exported goods worth approximately USD 447.7 million to Pakistan in the current fiscal year (April 2024 to January 2025). These exports included essential items such as pharmaceuticals (over USD 110.1 million), active pharmaceutical ingredients (APIs) valued at USD 129.6 million, sugar worth USD 85.2 million, auto parts totaling USD 12.8 million, and fertilizers amounting to USD 6 million. Conversely, imports from Pakistan were minimal, totaling just USD 0.42 million, which included niche agricultural products like figs and herbs.
Although formal trade channels are now completely closed, Pakistan is likely to continue importing goods through informal routes via third countries. GTRI estimates that nearly USD 10 billion worth of trade still occurs through re-export routes, primarily via the United Arab Emirates and Singapore. Pakistan reportedly imports various Indian products through these third countries, including pharmaceuticals, chemicals, cotton, tea, coffee, dyes, onions, tomatoes, iron, steel, sugar, salt, and auto parts. Conversely, India may receive goods such as Himalayan pink salt and dry fruits from Pakistan through similar indirect channels.
The current trade suspension is expected to increase the cost of goods in Pakistan while complicating supply chains, further straining the already tense relationship between the two countries.
**FAQ:**
**Q: How will the trade suspension affect prices in Pakistan?**
A: The suspension of formal trade is likely to raise the costs of Indian goods in Pakistan, as imports will need to be sourced through third countries, increasing overall expenses.
