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The Competition Commission of Pakistan (CCP) has asked the Pakistan Telecommunication Authority (PTA) to slap a ban on Chinese e-commerce platform Temu.

According to a letter, a copy of which is available with The Express Tribune, the CCP said it lacked the authority to impose the ban as Temu was not registered in Pakistan, therefore, the PTA should look into the matter.

The CCP highlighted its concerns about Temu’s disruptive presence in Pakistan by referring the matter to the PTA. In its official notice dated August 22, 2025, the CCP acknowledged industry complaints that Temu’s practices were damaging local commerce and undermining consumer rights, while clarifying that only the PTA held the authority to restrict or ban apps under the existing laws.

In their formal complaints, the Pakistan Retail Business Council and the Chainstore Association of Pakistan argued that Temu’s business model relies on predatory pricing and manipulative marketing, creating conditions that are unsustainable for domestic retailers.

By offering goods far below local market prices, Temu has been accused of distorting competition and squeezing out smaller businesses that form the backbone of Pakistan’s retail sector.

Temu, which entered Pakistan just a few months ago, has flooded digital platforms with aggressive advertising, luring customers through steep discounts and gamified promotions that critics say cross the line by manipulating consumers.

Independent sellers have already lodged complaints citing practices such as fake or recycled product reviews, absence of cash-on-delivery option and the lack of local return facilities, all of which leave Pakistani shoppers exposed and unprotected.

Consumer rights advocates warn that Temu’s model not only erodes trust in online commerce but also exploits regulatory loopholes — operating in Pakistan without the same accountability faced by domestic e-commerce players. This two-tiered problem of foreign players operating unchecked while local sellers face compliance obligations is being described by stakeholders as regulatory oversight at the expense of Pakistan’s economy.

Pakistan is not alone in encountering this challenge. Countries such as Indonesia and Vietnam have already moved to curb Temu’s operations, citing risks to fair competition and consumer welfare.

Pakistan’s broad money (M2), a key indicator of liquidity in the economy, stood at Rs39.39 trillion as of August 15, 2025, down 0.2% week-on-week (WoW), according to data released by the State Bank of Pakistan (SBP) and compiled by Arif Habib Limited (AHL).

M2 is the most widely used measure of money supply and includes currency in circulation, demand deposits, and time deposits with banks. Economists often track it to assess the availability of money in the economy and its potential impact on inflation, interest rates, and economic activity.

Within M2, the currency in circulation amounted to Rs10.8 trillion, making up 27.4% of the total broad money, slightly lower than the previous week. Meanwhile, total deposits with banks remained steady at Rs28.6 trillion, contributing the bulk share of 72% of M2. Deposits with the SBP also increased modestly to Rs50 billion.

In the current fiscal year to date (FY26TD), the broad money has contracted by 3.3%, reflecting a combination of factors including tight liquidity conditions, cautious lending and fiscal consolidation. Bank deposits have fallen by 5% since June, while the currency in circulation has inched up by 1.4% during the same period.

The Pakistani rupee registered a marginal rise against the US dollar in the inter-bank market on Tuesday, extending its winning streak for the 13th consecutive session. At close, the local currency settled at 281.86 per dollar, appreciating by one paisa versus Monday’s close at 281.87.

The rupee’s steady performance in recent days has been attributed to improved market sentiment, supported by an ongoing crackdown on illegal currency dealers and cross-border smuggling.

On a calendar year-to-date (CYTD) basis, the currency has depreciated by 1.17%, while in the fiscal year to date, it has appreciated by 0.68%, according to Ismail Iqbal Securities.

Gold prices in Pakistan climbed, tracking gains in the international market, where the precious metal rose on safe-haven demand after investor confidence in the US Federal Reserve was shaken by President Donald Trump’s dismissal of a Fed governor.

According to rates issued by the All Pakistan Sarafa Gems and Jewellers Association, the price of gold increased by Rs900 per tola, settling at Rs360,700. Similarly, the price of 10-gram gold rose by Rs772, reaching Rs309,242.

Import tariffs have become the priority trade issue since President Donald Trump took office on January 20, 2025, with a wide variety of measures announced and imposed by the US and other countries. These tariffs have the potential to disrupt all industries; however, they pose unique challenges for the manufacturing sector, in particular in areas such as automotive, where specific sectoral duties are also proposed. We have set out below i) a summary of key takeaways on the tariff landscape, as well as ii) specific takeaways regarding the manufacturing sector.

Tariffs

Since taking office, President Trump has announced a multitude of tariff measures on a variety of countries and products. This has generated uncertainty, with measures being announced, implemented, and suspended on short notice. In addition there is ongoing court action in the US as to the US Administration’s authority to impose wide-ranging tariffs that impact global trade, the outcome of which is awaited.

At the time of publication, a universal 10% tariff has been imposed against all territories with perceived trade imbalances with the US, with higher ‘reciprocal’ tariffs on certain jurisdictions such as China. In addition, significant tariffs have been imposed on certain products imported into the US, such as steel and aluminium (50% – other than from the UK where a trade deal reduces the tariff to 25%) and on certain sectors, such as the automotive sector (25% – again with a reduced tariff deal quota for the UK and the countries having signed a Trade deal with the US – including the EU & Japan). Other countries, who are hoping to sign trade deals with the US have either announced their own retaliatory measures or the continuation of negotiations for a trade deal in response.

Increased tariffs mean that industrial products and components from impacted jurisdictions are subject to higher customs duties on import into the US (and into any other jurisdictions that impose retaliatory tariffs against US originating products). Customs duty is paid as a percentage of the customs value of the imported goods and is a cost that will be borne by the importer (depending on its contractual terms with its customer, it may be possible for this cost to be passed on to the latter)…and will consequently hit the profit margin of the concerned stakeholders.

The implications of tariffs are wide ranging: the volatile nature of the current tariff landscape has created significant uncertainty in the markets, whilst tariffs on imports from major US trading partners like China, Canada, and Mexico may lead to increased consumer prices whilst straining key trading relationships. For automotive businesses territories such as Mexico and China are key manufacturing bases where the US tariff impositions have now led companies in that sector to re-evaluate their manufacturing locations.

Increased costs from tariffs can impact transfer pricing arrangements and compliance with the arm’s length principle. Companies need to determine which entity should bear the increased costs to ensure they remain tax deductible and align with group transfer pricing policies. Tariffs can also lead to potential double taxation issues, as different tax authorities may interpret cost allocation differently, possibly resulting in disputes and the need for relief through mutual agreement procedures.

In addition, tariff proposals are having an effect on M&A activity.  Buyers are unable to confirm their business case for acquisitions and the pricing of a deal as the future profitability of the target business may be impacted in a myriad of ways.  For example, if the target company’s supply chain includes the production of goods in Mexico which are then imported into the US, this could now be subject to a tariff and further erode the profit margin on such products.  As businesses typically trade on a multiple of EBITDA, this could have a substantial effect on the pricing of deals.

Manufacturing impacts

• Increased Costs and Prices: Tariffs will lead to higher costs for the importer, as noted above, and can lead to higher prices which are often borne by the end consumer. Since manufactured products and often involve components sourced from other countries, these increased costs could make production and aftermarket more expensive, for businesses and consumers alike.
• Supply Chain Disruptions: The global nature of many manufacturing supply chains means that tariffs could cause significant disruptions. Many manufactured products are the result of an internationally connected supply chain and sourcing materials may become more difficult and expensive, potentially leading to shortage problems. The re-routing of supplies at short notice to avoid tariff hits and the increased administration involved in changing supply routes are leading to backlogs and delays in delivery at ports as well.
• Manufacturing Location Strategies: the US administration’s stated aim of tariffs is to bolster US domestic production and incentivise companies to relocate their manufacturing operations to the US, also with the provision of various tax incentives under the One Big Beautiful Bill Act. While this could reduce dependency on foreign suppliers, it may also lead to higher production costs and longer timelines for product availability. The timescales for US relocation for companies opting to do so could prove extensive, and it is not clear in all cases – even considering the tariffs – whether US domestic production would prove cheaper than the vast economies of scale available in other countries, such as China.
• Materials, Parts and Semi-finished products scarcity and quality reduction: In response to escalating US tariffs on imported components, manufacturing companies are increasingly considering cost-cutting measures, including the use of lower-grade parts and semi-finished products. The tariffs have significantly raised the cost of high-quality imports, prompting manufacturers to explore alternatives that meet minimum specifications, but which may compromise long-term durability and performance.

  At the same time, the industry is grappling with a scarcity of parts and materials. This shortage stems from disrupted global supply chains, trade route realignments, and reduced availability of tariff-exempt sources. Many suppliers have scaled back production or shifted focus to less affected markets, while manufacturers face delays and rising competition for limited resources. The result is a constrained supply environment that challenges production schedules and quality assurance across the IMT sector.

Automotive

Targeted sectoral tariffs are also likely to have a significant impact on the automotive sector which depends on complex supply chains and offshore manufacturing, often in countries such as Mexico and China which are also key targets for US reciprocal tariffs. Further, the 25% tariffs on steel and aluminium-containing products (so called “derivative” products) that took effect at 12:01am March 12, 2025, also impact the automotive sector as many components contain steel and aluminium. (The 25% tariffs apply to the value of the steel/aluminium in such components.)

Many automotive components are manufactured in countries which are subject to proposed US tariff hikes and the tariffs can lead to increased costs and potential shortages. Many businesses are therefore actively re-evaluating their manufacturing strategies to diversify their production and supply bases, including considering countries in South East Asia and Eastern Europe. However where they have established supply chains and infrastructure in territories in which they have invested over long periods of time it may be financially and logistically challenging to relocate.

We finally also would like to stress the fact that the recent surge in US tariffs on Chinese-made vehicles has significantly disrupted global automotive trade flows. As Chinese automakers face mounting barriers to the US market, they are redirecting excess inventory toward Europe, where entry conditions remain comparatively more favorable. This shift exposes the EU to a potential influx of competitively priced Chinese vehicles, particularly electric models, which could challenge domestic manufacturers already grappling with rising production costs and supply chain disruptions.

European carmakers, long reliant on Chinese components and joint ventures, now face a dual pressure: higher input costs due to tariffs and intensified competition from Chinese brands seeking new markets for their surplus stock. The result is a strategic vulnerability that could reshape the EU automotive landscape.

Mitigation Strategies

Based on possible impacts, mitigation strategies should be taken into consideration (e.g. unbundling of transfer prices or use of alternative customs valuation methodologies to optimize customs values (read our blog, Trump Tariffs: Customs Valuation and TP Impacts and Mitigation Strategies). Businesses should be aware of their import and export volumes in the US and elsewhere, broken down by products and current tariff rates. This allows businesses to quickly calculate possible impacts on additional customs duties in both regions as a first step on the products targeted by the lists mentioned above and prioritize mitigation strategies.

Businesses should also audit existing contracts and standard terms for level of exposure to tariff changes throughout their supply chains, and their ability within the contracts to mitigate that exposure. Key clauses to review include:

• Pricing
• Material Adverse Change
• Change Control
• Change in Law
• Termination
• Force Majeure

Baker McKenzie has extensive experience with assisting clients in navigating and mitigating tariffs and trade-related actions, as well as conducting reviews of intercompany valuations on imports.