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Tariffs

Pakistan Auto Parts Manufacturers Warn of Industry Collapse Under New Tariff Policy

Strategic Insights

— 1 min read

The Pakistan Association of Auto Parts Manufacturers (PAAPAM) has sounded a dire warning about the implications of the newly announced National Tariff Policy 2025-30, which they believe could lead to the collapse of a significant portion of the domestic auto parts manufacturing industry. The policy aims to simplify the tariff structure by capping the maximum import duty at 15 per cent, but PAAPAM fears that this change will expose local manufacturers to cheaper imports, leading to severe destabilisation of Pakistan's industrial base. According to the association, the abrupt tariff rationalisation could result in the loss of up to 500,000 jobs, weakening the national manufacturing capacity.

Key Takeaways:

  • The Pakistan Association of Auto Parts Manufacturers (PAAPAM) has warned that the new National Tariff Policy 2025-30 could lead to the collapse of much of the domestic auto parts manufacturing industry.
  • The policy aims to simplify the tariff structure by capping the maximum import duty at 15 per cent, but PAAPAM believes that this will expose local manufacturers to cheaper imports.
  • The association estimates that the tariff rationalisation could result in the loss of up to 500,000 jobs, undermining livelihoods and weakening national manufacturing capacity.
  • PAAPAM has criticised the narrow zero to 15 per cent tariff band for eliminating the possibility of a structured cascading tariff system, which is essential for encouraging value addition and maintaining a balanced industrial ecosystem.
  • The association has also pointed out the uneven playing field in global trade, citing China's 13 per cent export rebate on certain products compared to Pakistan's 2.0 per cent duty drawback rate.
  • PAAPAM has warned that reducing tariffs on imports may worsen Pakistan's foreign exchange position by encouraging greater import volumes, putting additional pressure on already strained reserves.
  • The association has dismissed the idea that trade liberalization alone can drive export growth, arguing that domestic industry must first be strengthened for exports to become sustainable.

Statistics:

  • Up to 500,000 jobs are at risk due to the proposed tariff changes, according to PAAPAM estimates.
  • China offers up to a 13 per cent export rebate on certain products, while Pakistan's duty drawback rate remains at just 2.0 per cent.
  • Pakistan's foreign exchange reserves are already strained, and the reduction of tariffs on imports may put additional pressure on the country's foreign exchange position.

Sources:

  • Pakistan Association of Auto Parts Manufacturers (PAAPAM)
  • The News International (Source not explicitly mentioned)

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