Decoding the National Tariff Policy 2025-2030: Transforming the Trading Landscape in Pakistan?

The Economic Advisory Group published a series of data stories on the trade distorting effects of government intervetions through import tariffs in Pakistan between 2015 and 2024. These measures highlighted not only the complex nature of such measures but also the fact that Pakistan in comparison to Vietnam commonly applies such measures to restrict imports. Now that the Ministry of Commerce has published its National Tariff Policy 2025-2030 that seeks to eliminate the regulatory duties and reduce customs duties to a lower level, it is likely that trading landscape in Pakistan will transform. The following analysis shows the level of customs duties and the regulatory duties applied in the current policy and the degree to which they will be phased out or reduced. The data source for this analysis is Pakistan Customs Tariff 2024-2025, the National Tariff Plan 2025-2030 and SRO 1152(1)2025 by the Ministry of Finance and Revenue. The EAG also published a pictorial representation of the National Tariff Policy 2025-2030, which is a useful guide for this analysis.

Figure 1

The number of products affected by different slabs of the customs duties in the current year and in the 5^th year of the National Tariff Plan 2025-2030 is presented in Figure 1. The number of zero duties will increase across the products defined at HS two digit-level. In the current year, there is a larger number of slabs, leading to a more complex set of customs duties across the products. Lighter shades signify higher duties. However, the auto industry (HS 87) has the highest customs duties on the imports of certain completely built-up units (CBUs). On the other hand, the machinery and electrical equipment (HS84 and HS85) have the highest number of products, many of them facing higher duty rates. The transition in the next five years will lead to several products receiving duty-free concessions, while many of the maximum rates will fall below 15%. However, some of the products across industries such as made-up textile and apparel (HS61-HS63), machinery (HS84 & HS85) and transportation equipment (HS87) will continue to face relatively higher customs duties.

Figure 2

The volume of imports affected by different slabs of the customs duties in the current year and in the 5^th year of the National Tariff Plan 2025-2030 is presented in Figure 2. Products with higher customs duties in the current year are in the agricultural sector, particularly the finished vegetable products, fruits and tea. Imports of plastics products (HS39), iron and steel (HS72) the machinery sector (HS84 and 85) and the transportation sector (HS87) currently face higher tariff rate. Although, several imports in the current year will be imported duty-free, certain sectors such as the transportation sector may not see a complete transition, with products still facing the highest slab at 15%. However, the two figures do suggest that the national tariff policy aims to reduce the customs duties to zero across several products. The structure of the proposal suggests that this will be limited to products that already report lower tariff rates, while products with the highest tariff rates will be capped at 15%. Therefore, the lower duties will eventually be dropped to zero while the higher rates will reduce and be placed in lower slabs.

Figure 3

The complex nature of regulatory duties is highlighted with the number of products facing regulatory duties presented in Figure 3. The complexity involves using several different numbers of regulatory duties leading to uncertainty and confusion across products. Several of the regulatory duties are common on agricultural products (HS1 to HS24), textile inputs (HS50-HS63), iron (HS72) and machinery (HS84 & H85). The highest rates are on transportation equipment (HS 87).  

Figure 4

The value of imports in the current year facing regulatory duties is presented in Figure 4. The iron and steel industry (HS72) reports the highest value with several of them facing a regulatory duty of 5%, while imports of machinery (HS84 & HS85) report higher regulatory duties. Interestingly, imports of published books (HS 49) report higher regulatory duties. 

Figure 5

The increase in the number of products that will face zero customs duties in the next five years is presented in Figure 5. The machinery and equipment sector (HS 84 and HS85) will be the biggest beneficiary followed by cotton (HS 52). Other sectors such as iron and steel (HS 72) will also report several products for which the tariff will be reduced to zero percent. Several product categories are missing where there will are no additional products with zero customs duties. The transportation equipment, the made-up textile and apparels and several agricultural products stand out in this regard. The lowering of tariffs to zero customs duties are likely on products that are more likely to be used as inputs in manufacturing. This may reduce the need for issuing duty exemptions to preferred sectors.

Figure 6

The increase in the imports that will face zero customs duties in the next five years is presented in Figure 6. The biggest beneficiary is the plastics products (HS39), followed by oilseeds (HS12), iron and steel (HS72). The reduction in customs duties will impact more than $1.5 billion of plastics products, approximately $1 billion worth of oilseeds and less than $1 billion on iron and steel as well as machinery and electrical equipment. The imports of machinery and electrical equipment (HS84 and HS85) will also report an increase in zero customs duties. Certain textile inputs will also receive such duty concessions. However, again the products representing transportation equipment (HS87) are not reported.

Figure 7

Figure 8

The Figures 7 and 8 highlight the increase in the number of products and the increase in imports from these products that will see a reduction in the regulatory duties in the five years.  Reduction in regulatory duties on iron and steel will impact approximately $2.5 billion worth of imports. The reduction in regulatory duties on other products will have a much smaller impact.

Figure 9

The evolution of the trading landscape based on the reduction of customs duty is presented in Figure 9. Approximately $25 billion worth of imports into Pakistan is customs duty-free in the current year. Considering the same value and set of products imported in the current year, this will increase to $43 billion in the 5^th year based on the National Tariff Plan 2025-2030. The distribution across the other duty slabs in the 5^th year is relatively similar. The largest slab in the current after the duty-free slab is at 3%, in which $13 billion is imported. The higher slabs have lower values of imports.  

Figure 10

The evolution of the trading landscape based on the reduction of regulatory duty is presented in Figure 10. As regulatory duties will reduce to zero in five years, the 4^th year is shown where the regulatory duties will be reduced to 5 percent on products reporting a higher value in the previous years. In the current year, approximately $5 billion of imports into Pakistan face regulatory duties of 10 percent, while $1.8 billion report regulatory duties of 5 percent. Approximately 20 percent of imports into Pakistan face regulatory duties. This is expected to reduce to zero by the fifth year. In the fourth year, approximately $1 billion worth of imports will face regulatory duties, a decline from more than $10 billion in the current year.

In essence, the National Tariff Policy 2025-2030 is set to transform Pakistan’s trading landscape by reducing customs duties and eliminating the regulatory duties. Considering the current value and set of products imported, the policy aims to increase duty-free imports from approximately $25 billion to $43 billion within five years, indicating a shift towards a more open trading environment. While many products, particularly those used as manufacturing inputs, will benefit from zero customs duties, certain sectors like transportation equipment, made-up textiles, apparel, and some agricultural products will continue to still relatively higher customs duties. Some of the products may continue to report customs duties as high as 15%. This must be reduced by negotiating free trade agreements with different trading partners, particularly in the Asian neighborhood. The elimination of regulatory duties, which currently affect about 20% of Pakistan’s imports, is also a key aspect of this policy, with a projected reduction from over $10 billion to approximately $1 billion in the fourth year, eventually reaching zero by the fifth year. One of the key sectors that is likely to see the largest impact is iron and steel as regulatory duties are reduced to zero, followed by cotton and machinery and electrical equipment.