Pakistan and Afghanistan Poised to Boost Border Trade Amid New Preferential Agreement

Pakistan and Afghanistan are witnessing promising developments in bilateral border trade following the recent signing of a preferential trade agreement effective from August 1, 2025. This landmark deal reduces tariffs on key export commodities—such as Afghan grapes, pomegranates, apples, and tomatoes, and Pakistani mangoes, kinnow, bananas, and potatoes—from rates exceeding 60% to a more manageable 27%. The agreement, designed to bolster trade between the neighboring countries, is set to be renewed annually.

The combined impact of this initiative was already visible in the fiscal year 2024-25, during which bilateral trade surged by 25%, reaching a volume of $1.9 billion. The agreement aims to build on this momentum by easing economic exchanges and promoting mutual benefit.

Despite their shared history and cultural ties, trade relations between Pakistan and Afghanistan have faced numerous hurdles. Challenges such as security concerns, political tensions, smuggling issues, and operational barriers linked to border management have historically limited the potential of cross-border commerce. The Afghanistan-Pakistan Transit Trade Agreement (APTTA), while facilitating goods movement, has also grappled with these impediments, affecting its intended efficiency.

Trade across the border primarily consists of agricultural products and construction materials moving from Pakistan to Afghanistan, with Afghan exports including coal, raw cotton, and fruit preparations headed to Pakistan. However, smuggling remains a significant challenge, leading to revenue losses and complicating formal trade relations.

Looking ahead, Afghanistan’s strategic interest in utilizing Pakistani ports like Gwadar for transit and broader regional connectivity, including links to Central Asia, signals strong trade growth potential. Regional cooperation efforts involving China further enhance prospects for trade expansion, bringing infrastructure development and security collaboration into focus.

As Pakistan and Afghanistan take these critical steps to formalize and expand border trade, managing longstanding security, regulatory, and political challenges will be key to unlocking the full economic potential of this partnership. Sustained dialogue and cooperation remain essential for fostering stability and prosperity in the region.