New Tariff Policy lands domestic industry in hot waters

ISLAMABAD: Prime Minister Shehbaz Sharif’s economic team has landed the domestic industry—particularly the auto sector—in hot waters, as the newly proposed National Tariff Policy (2025–30) is being widely viewed as a potential disaster for local manufacturing, Newzshewz has reliably learnt.
This was the crux of a consultative meeting held between local industry representatives and the Ministry of Industries and Production, following a letter issued by the CEO of the Engineering Development Board (EDB) on May 17, 2025. In the letter, the EDB informed stakeholders of a sweeping overhaul in the country’s tariff policy.
According to the letter, under the National Tariff Policy 2025–30, the government has decided to significantly reduce import duties. The first phase of this reduction will begin with the 2025–26 federal budget and will be fully implemented over the next five years. Initiated under the direct instructions of the Prime Minister, the policy aims to support export-led growth and includes several major reforms: (i) elimination of Additional Customs Duty (ACD) over four years ;(ii) phasing out of Regulatory Duty (RD) over five years;(iii) gradual removal of the Fifth Schedule of the Customs Act, which governs duty exemptions for capital goods and industrial raw materials;(v) recasting the customs tariff into four slabs: 0%, 5%, 10%, and 15% ; and (vi) capping maximum customs duty at 15%.
Currently, there are five tariff slabs: 0%, 3%, 11%, 16%, and 20%. The EDB has conveyed that the 3% slab will be abolished, with affected items moved to either the 0% or 5% categories. The 11% slab will be reduced to 10%, the 16% slab to 15%, and the 20% slab will be gradually eliminated.
A follow-up Zoom meeting on May 19, 2025, chaired by the EDB CEO, saw maximum participation allowed by the platform, with some unable to join due to space limitations. Every participant who spoke opposed the proposed policy changes.
Representatives from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said they had already conducted extensive consultations with their members and submitted budget proposals to the relevant ministries. Similarly, auto vendors and original equipment manufacturers (OEMs) noted that the EDB had been engaged with various industrial sectors—including automotive—for over six months.
Industry stakeholders expressed frustration that such a sweeping policy shift was being introduced at an advanced stage in the budget planning process, despite ongoing consultations and an apparent consensus reached with the International Monetary Fund (IMF). They argued that the Tariff Policy Board, in coordination with the Ministries of Commerce and Industries & Production, had already finalized a roadmap for future tariffs.
“This proposal is a recipe for disaster,” one industry leader said. “It will destroy manufacturing in the country and turn Pakistan into a mere trading hub. With a maximum tariff of 15% on finished goods, what incentive is left to produce locally?”
Surprisingly, the EDB distanced itself from the proposal during the meeting. In response to repeated criticism, the CEO simply stated: “Please send your comments, observations, and suggestions in writing—we will take them up at the relevant forum.”
According to insiders, there appears to be a deep rift at the policy formulation level, with the fallout now spilling into the public domain.
The EDB’s letter also mentioned a second meeting scheduled for May 20, 2025, to be chaired by the Secretary of the Ministry of Industries and Production. However, the meeting was quietly postponed without explanation.
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