In 2025, the international trade landscape is undergoing some major volatility, as numerous countries revisit their tariff strategies Tariff News. According to World Trade Organization (WTO) chief Ngozi Okonjo‑Iweala, the share of global trade conducted under the so‑called “most favoured nation” (MFN) terms has fallen sharply — from about 80 % to only around 72%. Reuters She described it as “the largest disruption to global trade rules in the past 80 years.” Reuters
At the same time, the Organisation for Economic Co‑operation and Development (OECD) warns that rising tariffs—especially by the United States—could slow global economic growth and push up inflation. The Wall Street Journal
Some standout global developments:
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The United States has introduced higher, more differentiated tariffs on imports from many trading partners, departing from the principle of equal‑treatment among trading partners. UNCTAD+2World Economic Forum+2
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A high‑profile deal between the U.S. and the European Union reportedly set a 15 % tariff ceiling on most goods traded between them — a sign of both compromise and how high tensions were. AP News
The overall message: tariffs are no longer just about simple “protect industry X” logic, but increasingly linked to geopolitics, supply‑chain security, and trade policy realignments.
Pakistan’s Tariff Reforms: A Major Shift
Focusing on Pakistan, the country is implementing sweeping tariff‑rationalisation reforms aimed at making its economy more open, boosting exports, and reducing import costs.
Key policy moves
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Pakistan’s government approved a five‑year plan (2025‑30) to simplify and reduce customs duties, additional customs duties (ACDs), and regulatory duties (RDs). Dawn+1
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Under the draft National Tariff Policy 2025–30, the country aims to reduce its average weighted tariff rate from about 10.6 % down to approximately 7.2 % by 2029. The News International
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The customs duty slabs will be simplified to four levels: 0 %, 5 %, 10 %, and 15 %. Products currently facing higher protection rates will gradually be brought down. The News International+2Customs Today Newspaper+2
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For example, in the 2025‑26 budget the government abolished or reduced RDs on many items (1,149 items had RDs removed or reduced; 7,523 items had reductions in ACDs) and extended the zero‑duty slab to cover more tariff lines. Business Recorder+1
Motives
The rationale behind Pakistan’s reforms:
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Encourage export‑led growth by reducing cost burdens on industries that rely on imported raw materials/semi‑finished goods. Dawn+1
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Make the tariff regime more transparent, stable, and aligned with global best practices. The Nation
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Eliminate sector‑specific tariffs and protectionist peaks that favored a few large firms, which reportedly have hindered competitiveness. Dawn
Challenges & Backtracking
However, the reform path is not without obstacles:
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Despite announcing the reform agenda, in late June/July 2025 the government back‑tracked on eliminating RDs for over 300 tariff lines (including fruits, vegetables, seafood) due to pressure from domestic producers. Dawn
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This reversal raises concerns about consistency, credibility and the ability to resist protectionist pressures.
Implications: What This Means for Industry, Trade & Consumers
For Industries & Exports
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Lower tariffs on raw materials and intermediate goods should ease cost pressures for manufacturing firms, especially in textiles, engineering, chemicals. This could strengthen export competitiveness.
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Over time, the shift from high protection to lower tariffs means local industries will face more foreign competition; only efficient, export‑oriented firms will thrive.
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For Pakistan, if the target of boosting exports by about US$5 billion by the end of the five‑year plan is realised, it could significantly improve trade balance and economic growth. Dawn+1
For Consumers
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Fewer tariffs and lower import costs may translate into lower prices for imported goods and improved availability of semi‑finished inputs (which may also reduce costs for local production).
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But consumer benefits may be delayed: back‑tracking or protection of specific sectors could blunt the effect.
For Trade & Global Economy
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Globally, tariff hikes and policy uncertainty are creating turbulence in trade flows, supply chains and investment decisions. The WTO warning of rule erosion underlines rising global risk. Reuters+1
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Countries like Pakistan that lower tariff barriers may attract more foreign investment or integration into global value chains — provided complementary policies (logistics, customs efficiency) are in place.
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Conversely, major economies upping tariffs (such as the U.S.) risk retaliation, trade diversion, and slower global growth (as OECD forecasts suggest). The Wall Street Journal
Risks & Things to Watch
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Implementation gap: The reform agenda is ambitious; delays, partial roll‑backs or exceptions (as seen with the 300+ tariff lines in Pakistan) may undermine progress.
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Industry resistance: Firms accustomed to protection may lobby for exemptions, which can slow reform and create a patchwork system.
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Global retaliation/trade wars: If major economies persist in large‑scale tariff hikes, smaller countries may get caught in the cross‑fire (either as indirect targets or from supply‑chain disruptions).
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Supply‑chain adjustment: Reducing tariffs opens the market, but firms may require time to adjust sourcing, operations and cost base. There could be transitional volatility.
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Fiscal impact: Tariff reductions can erode revenue from customs duties; governments must either make up the gap via other taxes or accept reduced revenue. Pakistan’s plan estimates increased IRS/sales tax collections from higher trade volume may offset some loss. Dawn
What This Means for Pakistan (and Similar Economies)
For Pakistan, the tariff reform push is a major pivot away from a high‑protection, import‑substitution model toward a more open, export‑oriented model. The potential benefits are substantial — lower input costs, higher exports, improved competitiveness — but the devil is in the details.
If the government follows through and keeps to the timeline:
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Local industries will need to gear up for increased foreign competition. Firms should focus on improving productivity, quality, innovation.
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Import‑dependent industries should benefit immediately from lower duties on raw materials‑/semi‑finished goods.
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Policymakers need to ensure that customs procedures, digital infrastructure, logistics and trade facilitation keep pace — tariff reform alone is not enough.
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Vulnerable sectors (that previously benefited from protection) may face adjustment pain and will require transition support.
For citizens, lower import duties could mean cheaper consumer goods in the longer run — though prices won’t fall overnight, and inflation, currency depreciation and other factors will also play a role.
