Decoding the National Tariff Policy 2025-2030: The Impact on Different Sources of Imports.

The purpose of the National Tariff Policy 2025-2030 was to not only reduce customs duties, eliminate regulatory duties and additional duties but also simplify the complex structure of the customs duties slabs by reducing their number. As different tariffs are imposed on different products at the national tariff lines, they not only affect the imports at the product-level but also imports from different sources. For instance, imports from certain countries may be concentrated in mineral products while imports from other countries may be concentrated in consumer goods. Hence, customs duties that mostly discourage the imports of finished goods may affect the latter country. Analyzing the impact of the national tariff policy across major sources of imports is key as policymakers negotiate trade agreements. The following analysis considers the distribution of the customs duty slabs and the regulatory duties across major sources of imports.

The information on customs duties is extracted from Pakistan Custom Tariffs 2024-2025, and the regulatory duties from SRO 1152(I)/2025. The import values of 2024 are borrowed from International Trade Center’s Trademap.org. The same import values are used for the current year and the subsequent years.

One of the key products that stands out is the imports of machinery and electrical machinery (HS84 and HS85) from China. Pakistan imported approximately $6 billion worth from China, out of which $3.2 billion was duty free in the current year[1]. A large proportion of its faced 16% and more in terms of customs duties in the current year. Interestingly, Pakistan imported approximately $290 million worth of transportation

[1] One key point is that China already has an FTA with Pakistan. The two countries have negotiated a set of products for which they receive tariff concessions on their trade. The purpose of this exercise is to present the impact of the evolving duty slabs on imports from different trading partners. It is likely that imports from China are already receiving duty-free concessions. Those products reporting zero customs duties will not only be imported from other trading partners at zero duty but will also not require duty free concessions during FTA negotiations. Therefore, the change in the duty slabs will impact the negotiations of FTAs.

equipment (HS 87) from ASEAN countries in 2024, almost all of which faced a custom duty of more than 20%. Similarly, more than $800 million worth of transportation products from the rest of the world reported customs duty of more than 16%. Although, the imports of machinery and electrical equipment from ASEAN is lower than that of transportation equipment, the imports face an assortment of customs duties, with duties above 20% being prominent. A significant proportion of imports of man-made staple fibers (HS 55) report customs duties of 11%. Several of the agricultural products (HS1-24) imported from ASEAN and rest of the world face mainly 3% and 11% customs duty rates[1].

[1] Pakistan has an FTA with Malaysia (ASEAN country) and Sri Lanka. It has preferential trade agreements with several others. However, reduction to zero customs duties will be available to all import sources, not just the ones receiving preferential treatment.

The customs duties will decrease in the next five years, with several products reporting zero customs duties. The products that are likely to continue to face the burden of customs duties are transportation equipment (HS 87), machinery and electrical equipment (HS84 and HS85). However, even within the latter, approximately $4.2 billion worth of imports from China will be duty-free. Interestingly, the transportation products imported from ASEAN will continue to face the highest slab of customs duties at 15%, while several of the products of machinery and electrical equipment will continue to be imported at higher rates. Further, a larger proportion of imports from the EU and the US as well as from the rest of the world are likely to be duty-free as compared to from ASEAN in the next five years. This does suggest that there is a strong need to negotiate an FTA with ASEAN countries, many of which are labelled as ‘Factory Asia’.

Less than 50% of the imports into Pakistan from the different sources received customs duty-free concessions in the current year. However, 36% of the imports from rest of the world faced 3% customs duty. Approximately 10% of the imports from ASEAN reported more than 20% customs duty in the current year, which was the highest share amongst the listed sources.  Considering the scenario in the 5^th year, approximately 94% of the imports from rest of the world will be customs duty-free. This drops to 75% for the ASEAN countries, suggesting that ¼ of the imports from ASEAN will continue to face customs duties even after the reforms have been implemented. Approximately 10% of the imports from ASEAN will face the highest slab, at 15%. The negotiation of FTAs with ASEAN countries will be crucial to reduce the customs duties, particularly in products in which ASEAN, or ‘Factory Asia’, is the most efficient in its production.

The most commonly imported product facing regulatory duties is iron and steel (HS 72). It is primarily the main product imported facing duties from all regions except ASEAN. A larger number of products imported from ASEAN face regulatory duties. Several vegetable products and fruits, food preparation as well as machinery and electrical equipment imported from ASEAN face such measures. Therefore, with the abolishment of regulatory duties, imports from ASEAN are likely to face fewer complex measures in the form of regulatory duties.

Considering the progression in the elimination of the regulatory duties over the five years, the above graph presents the value of imports from different sources in the 4^th year, right before the elimination of regulatory duties in the 5^th year. Interestingly, the regulatory duties on imports from ASEAN in several of the manufactured items such as machinery and electrical equipment will be phased out by the 4^th year, while the regulatory duties on products from China will continue to impact the imports of such products. However, the scale of the impact will have shifted to much smaller values by the 4^th year.

Approximately 35% of the imports from ASEAN in the current year report regulatory duties of 10% or more. In comparison, this is approximately 5% for China and 8% for imports from US and EU. In the 4^th year, the imports facing regulatory duties will shrink to 3% and below for the sources listed. The elimination of the regulatory duties is the most important aspect of the National Tariff Plan 2025-2030 as it will not only help reduce the complexities but also mitigate the burden that importers of products from ASEAN countries. As ASEAN is one of the most efficient producers of several products that are key to industrial development and progress, the elimination of regulatory duties will likely help improve productivity and the integration of Pakistani producers into the global and regional trading networks.   

In conclusion, the Economic Advisory Group strongly advocates for a nuanced and strategic approach to trade policy, emphasizing that while the National Tariff Plan 2025-2030’s focus on simplifying customs duties and eliminating regulatory duties is commendable, its full potential hinges on proactive engagement in international trade negotiations particularly within the Asian region. Specifically, the significant and persistent tariff measures on imports from ASEAN countries, particularly in key industrial sectors, underscore an urgent need to prioritize the negotiation of comprehensive Free Trade Agreements with ASEAN. Such agreements are critical to fully integrate Pakistani producers into global and regional trading networks, enhance productivity, and ensure that the tariff reforms translate into tangible economic benefits and a more competitive industrial landscape.