New Tariff Regime Raises Costs, Doubts

New Tariff Regime Raises Costs, Doubts

Oct 5 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

A new wave of tariffs has washed over importers and manufacturers, following a directive from the Ministry of Finance. Signed into effect by customs officials and shaped by input from the Ministry of Industry, the tariff changes touch everything from raw peanuts to plastic packaging and fully assembled refrigerators. Some duties have fallen sharply, while others have increased, sending new signals to businesses across the country.

The Customs Commission has introduced new tariffs on a wide range of imported goods in response to a directive from the Ministry of Finance.

Signed by Azezew Chane, the commissioner representative, and distributed to all branch offices across the country, the changes follow recommendations from the Ministry of Industry and were approved by former Eyob Tekalegn (PhD), while he was state minister for Finance. According to the Finance Ministry, the revised tariff structure is part of an ongoing effort to match trade policy with the realities facing manufacturers and ensure fair tariff rates for companies that import raw materials and equipment.

According to federal officials, the adjustments are a step toward helping manufacturers remain competitive while keeping a close eye on government oversight of trade flows. The updated schedule features both reductions and increases in tariffs across several product categories, sending ripple effects through domestic industries and local markets.

The import duty on peanuts dropped sharply from 35pc to 15pc, even though overall imports of peanuts are relatively small. However, duties on folding cartons, boxes, and cases made of corrugated paper or paperboard went up from 15pc to 25pc. Other forms of plastic packaging and plastic sheets now carry tariffs ranging from 15pc to 25pc, while self-adhesive and non-printed plastic rolls remain at a modest five percent.

These changes are already making themselves felt among producers, particularly those in the food sector. Retail prices for peanut butter have climbed, and manufacturers say the soaring cost of packaging has been especially tough to absorb.

Henok Gemechu, general manager of Babile Peanut Butter Manufacturer, a company based in Qality and founded by his family in 2020 with 700,000 Br capital, attributed a major strain to the doubling of packaging costs.

“There are times we don’t operate,” he said, describing the growing pressures the company faces as it tries to manage costs and stay in business.

The company now charges 440 Br a kilogram for its product, a 40pc jump from the previous year. Though its equipment can process up to 1,000Kg of peanuts an hour, actual output now rarely exceeds 300Kg at best. According to Henok, imported peanut butter is even less affordable for shoppers, with supermarket prices topping 2,000 Br a kilogram, compared to about 500 Br for locally made brands.

Tariff adjustments have also reached other product categories, with mixed results. Air compressors mounted on wheeled chassis, along with different types of compressors, are now exempt from duties, from a previous rate of 15pc. Completely Knocked Down (CKD) refrigerators have shifted from a five percent tariff to zero, while Semi-Knocked Down (SKD) units saw their tariff rise from 15pc to 25pc. Fully assembled refrigerators still face a 35pc duty.

Eyob Seleshi, a significant shareholder of Eyob Seleshi Aircondition Refrigeration & Electrical Trading, foresees that the SKD tariff hike will eventually be passed on to consumers.

“Refrigerators aren't essential products,” he said. “Even modest price hikes encourage people to turn toward used or lower-quality units.”

Some refrigerators now sell for as much as 200,000 Br, echoing the rising costs and limited supply in the market.

Government officials defend the moves as part of a broader push to support local assembly and production.

According to Tsehay Abelie, from the Ministry of Industry’s Import Substitution Department, the tariff changes were designed to encourage more domestic assembly of appliances, to boost job creation and technical skills. He also disclosed duty-free status for electric vehicle (EV) batteries, chargers, and scooters, stating that these incentives are intended to support the green economy initiative and reduce unnecessary imports.

Nonetheless, not everyone in the industry is convinced the new policies will work as intended.

Semereab Serekeberhan, deputy board director of the Ethiopian Automotive Industries Association and a 20-year veteran in the field, cautioned that recent policy shifts could slow the development of the fledgling EV industry. He pointed out that previously exempt SKD and CKD EV assemblies are now subject to a 15pc VAT and a three percent social responsibility tax.

"The lack of clear and consistent rules risks stalling growth in the sector." he said.

In 2023, domestic manufacturing accounted for about 38pc of products that might otherwise have been imported. The Ministry of Industry projected this figure could reach 60pc over the next decade under the ‘Ethiopia Tamrit’ - Let Ethiopia Produce - initiative. The program is a flagship national policy, seeking to reduce dependence on imports, conserve foreign currency, and boost local manufacturing jobs.

As of 2024, manufacturing accounts for over 4.4pc of the GDP. In the last fiscal year, import substitution programs are credited with saving up to 2.6 billion dollars, mainly through increased domestic output in select industrial sectors. The National Import Substitution Strategy now identifies 96 priority products, spanning agro-processing, textiles, chemicals, and construction materials.

Still, the country’s trade balance remains stubbornly negative, with the trade deficit averaging eight billion dollars annually for the past decade. The pressure on foreign currency reserves remains acute, demonstrating the need for a careful balance of tariff policies to protect the federal government’s fiscal position and the competitiveness of local industry. Federal authorities are betting that ramping up local production and promoting the export of domestically substituted products will pay off. They hope to lift total export earnings from three billion dollars to 18.3 billion dollars, with nine billion dollars generated from manufacturing.

Their declared goal is to boost exports, reduce the trade deficit, create more jobs, and strengthen the industrial base.

Experts remain cautious. Tewodros Kassahun, a specialist in customs and logistics, believes that while the new schedule offers incentives for CKD imports and penalises SKDs, real-world enforcement is inconsistent.

“CKDs are incentivised duty-free, while SKDs are discouraged," he said. "But in reality, SKDs often pass as CKDs, and enforcement is weak."

Tewodros argued that better regulation and oversight are needed to ensure that tariff policy achieves its intended outcomes, supports genuine manufacturing, and leads to long-term economic gains.

PUBLISHED ON Oct 05,2025 [ VOL 26 , NO 1327]