Impact of USA-China Trade War on Financial Performance of Pakistan Textile Industry: A Comparative Analysis of Nishat Mills and Gul Ahmed

Abstract

The US China trade war, which intensified between 2016 and 2019, significantly disrupted global trade flows and restructured international supply chains, particularly within export oriented industries such as textiles. The imposition of heavy tariffs on Chinese goods by the United States compelled global buyers to diversify their sourcing strategies away from China, creating potential opportunities for alternative textile exporting countries, including Pakistan. Given Pakistan’s strong cotton base and vertically integrated textile sector, the trade war presented both opportunities and challenges for its leading textile firms. This study examines the impact of the US China trade war on Pakistan’s textile industry through a comparative financial analysis of Nishat Mills Limited and Gul Ahmed Textile Mills Limited, two of the country’s largest and most prominent textile manufacturers. While both firms operate within the same macroeconomic and geopolitical environment, their differing business models export focused operations in the case of Nishat Mills and a hybrid export retail model for Gul Ahmed provide a strong basis for comparative evaluation. A quantitative research approach is employed, utilizing secondary data extracted from the audited annual reports of both companies for the period 2016 to 2019. The study applies financial ratio analysis, including profitability, liquidity, efficiency, leverage, and shareholder return ratios such as Gross Profit Margin (GPM), Net Profit Margin (NPM), Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), and Operating Margin. Trend analysis is further used to evaluate performance changes before and during the trade war period. The findings reveal that the impact of the US China trade war on Pakistan’s textile industry was uneven across firms. Gul Ahmed Textile Mills Limited demonstrated a significant improvement in financial performance during the onset of the trade war, particularly in 2018, reflected in higher profitability margins, improved ROA and ROE, and a substantial rise in EPS. This performance suggests that Gul Ahmed was able to capitalize on increased export demand and benefited from its focus on value added products and operational flexibility. In contrast, Nishat Mills Limited exhibited relatively stable but weaker performance, with declining margins and limited gains during the same period, indicating that higher cost pressures and a more rigid operational structure constrained its ability to fully exploit trade diversion opportunities. Overall, the study concludes that while the US China trade war created favorable conditions for Pakistan’s textile exports, the extent of benefit depended largely on firm level strategic responsiveness, product diversification, and operational efficiency. The research highlights the importance of adaptability and value addition in enabling textile firms to benefit from global trade disruptions. The findings offer valuable insights for policymakers, industry stakeholders, investors, and future researchers seeking to understand the financial implications of global trade conflicts on emerging market industries.