Comparing Like with Like – Tariffs in NTP 2025-30

An analysis of where Pakistan stands in the region, with automobiles as a case study

Summary

Like for like only in part. National Tariff Policy (NTP) 2025-30 concludes that Pakistan’s tariffs are the highest in South Asia by adding its additional customs duty (ACD, 3.65 percent) and regulatory duty (RD, 4.57 percent) to its 10.3 percent customs duty average, and comparing the total of 18.5 percent with comparators’ customs duty alone. That comparison is only partly like for like. Counting para-tariffs for every economy narrows the reported gaps: from 10.1 to about 2 percentage points against Sri Lanka and from 4.4 to about 2 points against Bangladesh.

Among the most highly protected. On customs duty alone, Pakistan’s average ranks in the middle of the five economies compared, below India and Bangladesh. Including para-tariffs for every economy, Pakistan is among the most highly protected economies in the comparison: at 18.5 percent, its average is about double Viet Nam’s and Thailand’s, 1.5 points above India’s 17.0 and about 2 points above Sri Lanka’s 16.5 and Bangladesh’s 16.4. The precise ranking depends on which taxes are counted, notably Bangladesh’s supplementary duty, and on reference years.

Not a light regime. Pakistan has the second-highest share of HS six-digit subheadings with duties above 15 percent among the nine economies the NTP lists, and its cascaded structure generates high effective protection: the World Bank estimated 143 percent for motor vehicles and parts taken together, at 2019 tariffs.

Low on cars, high on parts. Since July 2026, Pakistan’s customs duty on fully built (CBU) cars, 30-50 percent, has been below that of India, Viet Nam and Thailand. This rate is before additional customs duty, regulatory duty and federal excise duty. Above 2,000cc it is also before the new special excise duty of 86-92 percent on imported cars, which offsets the duty cuts on large cars. Pakistan’s duties on kits and parts are among the highest of the five: 29 percent on commercially imported parts and up to 46 percent on localised parts.

The NTP’s reductions for autos. The evidence supports reducing kit and parts duties. Regional comparison alone cannot establish whether a 15 percent duty on fully built cars by FY2029-30 is appropriate for Pakistan. It shows that such a rate would fall below every comparator’s MFN rate, and the reported targets of the Auto Policy 2026-31 differ from it, so the end-point needs a domestic justification and should follow the cuts on inputs.

The policy’s concern is also with complexity and bias. The NTP aims to remove anti-export bias and the dispersion of rates across lines, which raises compliance costs, invites rent-seeking and makes it hard for firms to plan. It treats simplifying the Fifth Schedule, and establishing a level playing field between producers serving the domestic market and those competing abroad, as being as important as lowering average rates.

Policy implications. Compare like with like in tariff policy documents, publish effective rates of protection alongside nominal rates, settle the end-point for fully built cars, and cut duties on inputs ahead of duties on finished cars, for a fixed period.

About the figures. Unless attributed to another source, the figures in this report are PIDE estimates compiled from national tariff schedules, WTO data and secondary sources. Many comparator rates are provisional, marked as such in tables and figures, and will be revised as line-level data are verified.

1. Introduction

In 2019, Pakistan undertook a directional change with regard to its trade tariff through the first National Tariff Policy (NTP) for the years 2019-24. This policy was designed with the objective of improving manufacturing and export competitiveness by providing lower-duty access to imported raw materials and inputs. NTP 2019-24 aimed to remove tariff anomalies that distort prices and to reduce the cost of doing business. Improving consumer welfare was also cited as a primary objective of the policy (Ministry of Commerce, 2019).

The first NTP was a framework of objectives, principles and guidelines rather than a schedule of rate changes. It stated that tariffs would be employed “as an instrument of trade policy rather than revenue”, with duties on inputs lowered and additional customs and regulatory duties gradually reduced. It also made strategic protection time-bound, to be phased out so that domestic industry becomes globally competitive, while retaining the principle of cascading, under which tariffs rise with each stage of processing so that tariffs on inputs are no higher than tariffs on the finished product (Ministry of Commerce, 2019).

A PIDE review of NTP 2019-24 welcomed its move away from revenue as the aim of tariff policy, but noted that it carried forward three principles from earlier practice: cascading, strategic protection and import substitution (Qadir, 2020). The review argued that a cascaded tariff “ends up being a tax on top of a tax”, compounding protection for downstream sectors, and that it may promote rent-seeking, reduce productivity and hurt consumer welfare. It observed that protection promised as temporary had rarely been withdrawn, and that industries given high protection, automobiles, sugar and paper among them, had not become competitive. It also noted that interest groups pressed for ACD and RD, whose coverage had grown, and recommended removing both, eliminating SROs and backing the policy with a time-bound implementation plan.

The second NTP for the years 2025-30 outlines the next steps for Pakistan’s shift towards a much more liberalised tariff structure. While acknowledging the broader objectives of the first NTP, the second NTP introduced more targeted interventions aimed at improving competitiveness, attracting investment through removing tariff anomalies to improve consumer welfare and promote export-led growth (Ministry of Commerce, 2025).

Moreover, the second NTP set yearly targets for simplification of tariff slabs, reduction of customs duty, elimination of ACD and RD, and reducing the simple average tariff to 9.7 percent by FY2029-30, from 20.19 percent in FY2024-25 (Ministry of Commerce, 2025). It acknowledges that the current tariff structure “follows a cascading principle” and commits to eliminating ACD within four years and RD within five, in line with the 2020 review’s recommendation. It also confirms the trend the review identified: of 7,589 tariff lines, with ACD applying to approximately 7,476 and RD applying to 1,996 (Ministry of Commerce, 2025).

2. The Tariff Debate

The policy interventions and tariff rationalisation measures outlined in the second NTP have received mixed views from the academic and research community, policy experts, and the industry. While the objectives of the NTP are widely appreciated, the extent of reduction in import tariffs has been strongly opposed by some of the leading voices of the private sector, including the assemblers’ and parts manufacturers’ associations (PakWheels, 2026b; Business Recorder, 2026a). A few primary reasons for disagreement include fear of loss of domestic market competitiveness, criticism of the tariff comparison with regional economies, and the threat of job losses in the local industry due to increased competition from imported goods.

Most recently, the regional comparison of tariffs outlined in the second NTP came under discussion and debate at the PSDE International Conference and AGM in October 2026. During the panel discussion on ‘Customs and Tariff Reforms for Exports Take-off’, an industry representative expressed the view that the comparable tariffs mentioned in the NTP summed customs duty and para-tariffs (ACD and RD) for Pakistan but compared the total with only the customs duty of other economies, inflating Pakistan’s tariff incidence. While it was refuted by members of the team that designed the policy and were part of the panel discussion, it has sparked a debate in policy and academic circles. This report aims to review tariffs across a few of the countries mentioned in the policy and assess the evidence behind the argument of Pakistan’s tariff incidence being inflated in the policy.

The comparison raised at the panel is in section 4 of NTP 2025-30 (Ministry of Commerce, 2025, pp. 4-5). Citing the WTO Tariff Profiles 2024, the policy states that Pakistan’s simple average MFN applied tariff of 10.3 percent, “combined with 3.65% ACD and 4.57% RD makes it the highest in South Asia”. The comparator figures it gives, including India’s 17.0, Bangladesh’s 14.1, Thailand’s 9.8 and Viet Nam’s 9.4 percent, are simple average MFN applied tariffs, which count customs duty alone. The industry representative’s description of the comparison is therefore accurate. Whether the comparison overstates Pakistan’s position depends on the comparators’ own para-tariffs. Section 6 sets out PIDE’s like-for-like estimates of them.

This report therefore asks three questions: Is the NTP’s regional comparison like for like? Where does Pakistan rank when each layer of protection is compared on the same basis? And, for automobiles, does the evidence support the scale of tariff reduction set out in the NTP and the new auto policy?

To find answers to these questions, section 3 sets out the three layers of protection referred to throughout. Sections 4 and 5 describe Pakistan’s tariff structure and its history. Section 6 compares economy-wide tariffs, including the NTP’s own comparison and a like-for-like chart, and section 7 compares automobile tariffs and assesses the NTP’s cuts for the sector. Section 8 considers what the findings mean for parts manufacturers, assemblers and consumers, and section 9 sets out the main findings, policy implications and areas for further research.

3. Measuring protection: three layers

The ranking depends on which layers are measured. Each comparison in this report is therefore shown on three layers. NTP 2025-30 compares Pakistan on the second layer with its comparators on the first (section 6). Section 6 then restates the comparison with para-tariffs included for every economy.

Effective protection measures what a tariff structure does to an industry’s value added rather than to the price of its output. Where duties are low on inputs and high on finished goods, the nominal tariff on the finished good understates the protection it gives: because inputs enter cheaply, the effective rate of protection on value added is much higher than the nominal rate. This is how cascading generates high effective protection (Varela et al., 2020).

Table 1. Three layers of protection, by country

4. Pakistan’s tariff structure today

Pakistan’s import charges comprise five cumulative components, and the NTP 2025-30 is phasing out two of them. The FY2026-27 budget is the second phase of implementing the second NTP. As proposed in the budget, it cut ACD on 2,107 tariff lines from 4 to 2 percent and on 449 lines from 6 to 4 percent, and cut RD above 20 percent to 20 percent on 359 lines (Nukta, 2026); these line counts are budget proposals as reported, not counts from the final notifications.

Table 2. Pakistan’s import charges, FY2026-27

5. Pakistan’s tariff history, 1987 to 2026

Pakistan’s tariffs fell sharply from the late 1980s to 2002, rose again through para-tariffs over the following two decades (Varela et al., 2020), and are now being cut a second time. However, in every year for which data were found, automobiles stayed above the general maximum tariff.

Table 3. Pakistan’s tariff history, 1987 to 2026