ISLAMABAD — Pakistan’s new National Tariff Policy (2025–30), unveiled through the Finance Act 2025, budget speech, and recent FBR notifications, sets ambitious targets to reform the country’s import tariff structure in a bid to improve industrial competitiveness, enhance exports, and reduce input costs.
The headline objective is a reduction in the average effective customs tariff from 20.19% to 9.70% over five years. This is to be achieved by streamlining customs duty (CD) slabs to four levels: 0%, 5%, 10%, and 15%, down from the current five, alongside the phased elimination of regulatory duties (RDs) and additional customs duties (ACDs) by FY30 and FY29 respectively.
What the Policy Promises
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Greater access to raw materials and intermediate goods
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Employment growth through industrial expansion
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Removal of tariff anomalies that distort value chains
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Improved consumer welfare via lower import costs
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A reduction of maximum CD to 15% and complete removal of ACDs and RDs within four to five years
The Fifth Schedule, which provides various duty exemptions, will also be restructured. A total of 479 entries (mostly under machinery, poultry, and miscellaneous goods) will be deleted or moved to simplify and harmonize the duty structure.
The Reality Behind the Numbers
However, an early analysis of revised tariff changes shows that the short-term impact on import costs may be less significant than projected:
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A group of 292 PCT codes, mostly under food, agriculture, chemicals, textiles, and machinery, saw a minor CD cut from 16% to 15% and ACD from 4% to 2%—a reduction in name, but not in real trade cost terms.
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Over 2,200 items with 20% CD witnessed no change in CD, and ACD fell only slightly from 6% to 4%.
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For 468 highly protected items, CD remains at 30%–100%, with only a 1% cut in ACD.
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Notable RD reductions include 50% drops in key sectors: chemicals, plastics, textiles, and machinery, e.g., plastics from 15% to 7.5%, chemicals and mineral products from 10% to 5%.
- Pakistan’s Consumer Confidence Index Rises 24.6% Year-on-Year in Q4 FY2024-25
While the auto sector remains largely protected under the current Auto Industry Development and Export Policy (AIDEP 2021–26), tariff rationalisation for auto parts is scheduled to begin after July 1, 2026.
Muted Response from Industry
Interestingly, powerful industrial groups have not voiced significant resistance. Analysts suggest this may reflect the predictable, gradual nature of the changes—allowing industries time to adjust their business models—or that the impact on protected sectors remains limited.
Policymakers may also be responding to global trade uncertainties, especially U.S. tariff policy shifts under Donald Trump’s influence, which have affected global trade negotiations.
Expert View: Incremental, Not Transformational
While the direction of the policy is broadly praised, some economists argue it falls short in terms of depth and pace of liberalisation.
“The government’s phase-wise approach reflects concern over revenue losses and pushback from influential groups. But if we want export-led growth, faster and deeper liberalisation is required,” noted one analyst.
Despite limited immediate benefits, the long-term goal of a transparent and competitive tariff structure remains vital. This could lay the foundation for future export diversification, industrial upgrading, and sustainable economic growth—provided the government follows through on implementation.
