Pahalgam attack sparks India and Pakistan trade war
The escalating tensions between India and Pakistan, reignited by the tragic Pahalgam terror attack on April 22, 2025, have plunged bilateral relations into one of their most precarious phases since the 2019 Pulwama crisis. The attack, which claimed 26 lives, mostly tourists, in Indian-administered Kashmir, has triggered a multifaceted Indian retaliation – economic, diplomatic, and logistical – that has effectively severed key channels of engagement between the two nuclear-armed neighbours.
On April 22, 2025, gunmen opened fire on tourists in a scenic meadow near Pahalgam, killing 26 people, including 25 Indian citizens and one Nepali national. The attack, claimed by the obscure militant group Kashmir Resistance, was described by Indian authorities as having “cross-border” links, with New Delhi pointing the finger at Pakistan. Islamabad vehemently denied involvement, with Prime Minister Shehbaz Sharif offering to cooperate in a neutral investigation. However, India’s response was swift and uncompromising, reflecting a policy of “zero tolerance” toward terrorism, as articulated by Prime Minister Narendra Modi, who vowed to pursue the perpetrators “to the ends of the earth”. The Pahalgam attack shattered the fragile calm in Kashmir, where militancy had reportedly declined since India’s revocation of the region’s autonomy in 2019. Unlike previous attacks targeting security forces, this assault on civilians, many singled out for their Hindu identity, evoked widespread outrage across India, fuelling calls for military and economic retaliation. The attack’s brutality and its timing, amid India’s efforts to project Kashmir as a safe tourist destination, have amplified its geopolitical fallout.
India’s response to the Pahalgam attack has been a comprehensive clampdown on Pakistan, encompassing trade bans, maritime restrictions, and airspace closures. On May 3, 2025, India imposed an immediate ban on all imports from Pakistan, suspended mail exchanges, and prohibited Pakistani-flagged ships from docking at Indian ports. Indian vessels were similarly barred from Pakistani ports, and a Notice to Airmen (NOTAM) issued on April 30 banned Pakistani-registered aircraft from Indian airspace until at least May 23. Pakistan retaliated in kind, suspending all trade with India, closing its airspace to Indian airlines, and banning Indian ships from its ports. The suspension of the Indus Waters Treaty (IWT) by India, a 1960 agreement allocating 80% of the Indus River system’s water to Pakistan, was particularly contentious. Pakistan declared any attempt to divert its water share an “act of war”, underscoring the treaty’s critical role in its agricultural economy. Bilateral trade, already minimal at $1.2 billion in 2024, has ground to a halt. The closure of the Wagah-Attari border, the last remaining trade route, has further choked economic interactions. India’s exports to Pakistan between April 2024 and January 2025 were $447.65 million, with imports at a mere $0.42 million, reflecting the limited but symbolically significant trade ties now severed.
The trade war’s ripple effects are profoundly disrupting the lives of ordinary citizens in both countries, particularly those in border regions and communities dependent on cross-border interactions.
1/ Economic Fallout: In Pakistan, the trade ban exacerbates an already fragile economy. The suspension of the IWT threatens agriculture in Punjab and Sindh, where millions of farmers rely on Indus waters. Early crop harvesting in Jammu and Kashmir, driven by border tensions, signals similar agricultural disruptions on the Indian side. Small traders in Amritsar and Lahore, who once facilitated cross-border commerce, face immediate losses, with markets like Amritsar’s shutting down in protest after the attack.
2/ Humanitarian Toll: The revocation of visas has stranded hundreds of citizens. Over 1,000 Indians left Pakistan via the Wagah border in the six days following the attack, while 191 Pakistani nationals returned home after India’s 48-hour deadline. Families with mixed Indian-Pakistani ties face heart-wrenching separations, as visa restrictions force them to “choose sides”.
3/ Social and Cultural Disruptions: India’s blocking of 16 Pakistani YouTube channels and social media accounts of prominent Pakistani celebrities like Fawad Khan and Atif Aslam reflects a digital dimension to the conflict. These measures, aimed at curbing alleged misinformation, limit cultural exchanges that once fostered people-to-people connections. In Kashmir, heightened security and curfews have disrupted daily life, with markets in Srinagar under heavy paramilitary presence.
4/ Psychological Impact: The constant exchange of fire across the Line of Control (LoC), reported for 12 consecutive nights by May 6, 2025, has instilled fear in border communities. In Ferozepur, India, a 30-minute blackout rehearsal underscored the looming threat of escalation. Farmers, traders, and residents live under the shadow of potential military conflict, with the Pahalgam attack’s memory fuelling distrust and division.
The India-Pakistan rivalry, rooted in the 1947 partition and the Kashmir dispute, has seen similar escalations, notably after the 2008 Mumbai attacks and the 2019 Pulwama bombing. Past de-escalations, often facilitated by global powers like the U.S. or Russia, relied on open communication channels and mutual deterrence as nuclear powers. Today, however, the suspension of key agreements like the IWT and the Simla Agreement (1972), which governs the LoC, shrinks diplomatic space, raising the risk of miscalculation. Global calls for restraint from U.S. Secretary of State Marco Rubio, UN Chief António Guterres, and Iran’s Foreign Minister Abbas Araghchi have yet to yield de-escalation. Pakistan’s outreach to Russia and China for mediation highlights its diplomatic isolation, while India’s briefings to G20 nations and South Korea signal a strategy to globalise the narrative of Pakistan’s alleged complicity. The India-Pakistan trade war, catalysed by the Pahalgam attack, is more than a geopolitical standoff; it is a humanitarian crisis reshaping the lives of millions. Farmers face uncertain harvests, traders grapple with shuttered markets, and families endure forced separations. While the attack’s brutality justifies India’s hardline stance, the tit-for-tat measures risk entrenching a cycle of hostility that offers little resolution to the Kashmir conflict or the broader rivalry. For ordinary citizens, the cost of this escalation is immediate and personal, underscoring the urgent need for dialogue to prevent further suffering. As history suggests, de-escalation is possible, but it requires restraint, evidence-based accountability, and a willingness to prioritize people over politics.
Chandan Kumar Nath,
Sorbhog, Barpeta