Tariff News: Implications & Developments

In Pakistan, the government has approved a five‑year reform plan aimed at simplifying and lowering the country’s tariff regime Tariff News. Key elements include:

• Reducing customs duty (CD) slabs from the current five levels (0 %, 3 %, 11 %, 16 %, 20 %) to four levels (0 %, 5 %, 10 %, 15 %) and capping the maximum duty at 15 %. Dawn+2Profit by Pakistan Today+2

• Phasing out Additional Customs Duty (ACD) (ranging currently from ~2 % to 7 %) as well as Regulatory Duty (RD) (up to 90 % in some cases) over the next four to five years. Business Recorder+1

• Aligning with an understanding with the International Monetary Fund (IMF) that Pakistan will reduce its trade‑weighted average tariffs from about 10.6 % to near 6 % over five years. The Express Tribune+1

• Targeting industries that have been highly protected (auto, iron & steel, textiles) with the goal of boosting exports and shifting toward export‑led growth. SAMAA TV+1

Reversals & friction

However, not everything is proceeding smoothly. The tariff reform agenda in Pakistan has already seen a significant back‑step:

• The government has retained regulatory duties on over 300 tariff lines (including seafood, fruits, vegetables) despite earlier commitments to eliminate them. Dawn

• As a result, the simple average tariff in Pakistan has increased from the planned ~15.83 % to ~16.58 %. Dawn
  This demonstrates the tension between reforming trade policy and protecting domestic producers.

Global moves: U.S. tariffs & escalation

In the United States, the trade/tariff landscape is also undergoing dramatic changes:

• The U.S. announced a baseline 10 % tariff on all imports (≈ US$3.3 trillion annual volume) and additional tariffs (10 %‑50 %) on around 60 countries with significant trade‑barriers against U.S. goods. The Washington Post

• Major trading partners such as the European Commission and People’s Republic of China have threatened retaliation, warning that “there are no winners in trade wars”. New York Post

• Furthermore, a U.S. federal appeals court ruled that many of the tariffs imposed by the U.S. President exceed the legal authority under the International Emergency Economic Powers Act (IEEPA), raising questions over their long‑term enforceability. TIME

2. Why it matters

Trade‑cost & competitiveness effects

Tariffs raise the cost of imported goods, which has several knock‑on effects:

• For a country like Pakistan, lowering tariffs on raw materials and semi‑finished goods can reduce production costs for exporters, making their goods more competitive abroad. SAMAA TV+1

• Conversely, high tariffs impede imports of inputs, increase costs for domestic manufacturers, and can hinder export potential if raw material costs remain elevated.

• Globally, the U.S. move to a broad tariff base signals a shift away from decades of trade liberalisation, and will likely increase supply‑chain costs, raise consumer prices, and possibly spark retaliatory measures.

Structural change & industrial strategy

• Tariff reform in Pakistan is part of a broader pivot: moving away from import‑substitution toward an export‑led model, leveraging improved access to inputs and global markets. Dawn+1

• At the global level, tariffs are not just trade‑barriers but tools of industrial strategy: protecting certain sectors, reshoring manufacturing, or punishing trading partners. Research shows that tariffs can reshape sectoral composition and trade flows. arXiv

Inflation & consumer impact

• Tariffs act like taxes on imports. Consumers often end up paying higher prices for goods. For example, analyses suggest that U.S. consumers have borne a significant portion of the cost of tariffs. Reddit+1

• Especially in developing economies, where imported goods (raw materials, components) are essential for manufacturing, higher tariffs can feed into inflation and reduce growth.

Trade‑relations & spill‑over risk

• Large shifts in tariff policy (like the U.S. global 10 % baseline) increase risk of trade wars, retaliation, and uncertainty, which can hamper investment, disrupt supply chains, and slow global growth.

• For exporters in countries like Pakistan, changes in partner‑tariff regimes, or new tariffs imposed by major economies, can affect access and competitiveness. For example, Pakistan‑U.S. tariff developments may open or restrict export windows. The Nation+1

3. Key challenges & considerations

• Balancing reform vs protection: Pakistan’s back‑tracking on eliminating duties for certain lines shows how domestic political/economic pressures (industries lobbying for protection) can undermine reform efforts.

• Implementation risk: Simplified slabs or lower maximum duties are only meaningful if procedures, compliance and transparency improve. Otherwise, complexity and discretionary duties may persist.

• External exposure: Countries opening up (lowering tariffs) become more exposed to global competition, supply‑chain risks, and fluctuations in global demand.

• Retaliation dynamics: When major economies adopt aggressive tariff policies, small & medium countries may be caught in the crossfire — either facing higher costs or lost market access.

• Consumer vs industry trade‑offs: Lower tariffs benefit consumers and user manufacturers, but domestic industries may resist competition from imports. Policymakers must balance these interests.

4. Implications for Pakistan (and region)

For Pakistan specifically (and by extension for neighbouring economies) the tariff news has the following implications:

• If the reform plan is successfully implemented, the reduction in tariffs and duties should help reduce input costs for export‑oriented sectors (textiles, light engineering, etc.).

• Lower tariffs could help reduce the trade deficit (by promoting exports and reducing costly protection distortions) and may attract foreign investment because of a more predictable trade regime.

• But the reversal (retaining duties on certain lines) signals that some industries will demand ongoing protection, which may limit the full benefits of reform.

• Global tariff shifts (especially from large markets like the U.S.) mean Pakistani exporters need to watch not only domestic policy but also how partner markets’ tariffs evolve (e.g., U.S. imposing 19 % tariff on Pakistani exports). The Nation+1

• Policymakers will need to pair tariff reform with broader support—improving infrastructure, easing non‑tariff barriers, enhancing competitiveness of firms—to ensure the benefits of open trade are realised.

5. What to watch going forward

Here are some angles to monitor:

• Whether Pakistan sticks to the tariff cut timelines (e.g., reducing average tariffs to 6 %) and how this plays out across sectors.

• How domestic industries (e.g., auto, steel, textiles) respond: will there be strong push‑back or will they adapt?

• How major economies respond to tariff policy shifts: does the U.S. face real retaliation? Do global trade tensions escalate?

• Impact on consumers: will import prices decline where tariffs fall? Or will supply‑chain disruptions offset benefits?

• For exporters: changes in access to key markets, and how tariff changes influence competitiveness.

• Whether tariff reform is accompanied by non‑tariff reform (customs, regulatory duties, logistics, trade facilitation), which often determines the true impact.