Pakistan-Afghanistan Trade Grows Amid Security Challenges
Trucks carrying goods on the road from Jamrud in Pakistan to the Torkham Border Crossing on the Pakistan-Afghanistan border.
In an encouraging development, bilateral trade volume between Pakistan and Afghanistan reached nearly $1 billion in the first half of 2025, according to a report from the Afghan Ministry of Industry and Commerce. The growth was driven by strong Pakistani exports to Afghanistan, which mainly included medical supplies, parboiled rice, sugar, cotton textiles, and raw materials.
While this marks an increase in trade between the two neighbors, it is not the first time that bilateral trade has reached this level in recent years. Besides, the current trade relationship between Pakistan and Afghanistan is way below potential. It is estimated that the trade could grow to $8 to 10 billion annually if obstacles could be overcome.
While recent trade growth shows mutual demand from both sides, the persistent militant attacks by the Tehreek-e-Taliban Pakistan (TTP) have become a significant obstacle to strengthening trade and economic relations between Pakistan and Afghanistan.
The issue of terror remains a central concern for Pakistan when it comes to its relationship with Afghanistan, including trade talks. According to a Pakistan Institute for Peace Studies report, Pakistan faced 521 terror attacks in 2024 — a 70 percent increase over the previous year. These attacks claimed nearly 1,000 lives across Pakistan. In the first six months of 2025, the TTP claimed responsibility for more than 1,300 terror attacks in Pakistan, which resulted in over 1,600 casualties.
Arguably, terrorism is one of the major reasons why Pakistan and Afghanistan have not made significant progress in trade dealings. In a policy shift in 2023, Pakistan imposed a 10 percent fee on goods imported by Afghanistan using its ports. The move was seen as Pakistan using its economic leverage against the Afghan Taliban to push Kabul to act against terrorist groups operating from Afghanistan.
The existing modest growth in bilateral trade also coincides with the cautious easing of tensions between the two countries.
In recent months, there have been visible efforts to improve the bilateral relationship. Much of this is being facilitated by the Chinese mediation that appears to have created space for high-level diplomatic engagement between the two countries.
For instance, in May, the Pakistani government announced that it would appoint an ambassador to Afghanistan. This is the first such appointment by Pakistan since the Afghan Taliban seized control of Kabul in 2021.
A turning point in this regard occurred in April 2025, when Pakistan's Foreign Minister Ishaq Dar visited Afghanistan. This was the first high-level visit from Pakistan after more than two years. Last month, China, Pakistan, and Afghanistan signed an agreement to extend the China-Pakistan Economic Corridor (CPEC) into Afghanistan.
It appears that Pakistan and China are focusing on trade discussions to motivate the Afghan Taliban to put pressure on the TTP and other militant groups. Such a course of action could potentially create economic space for the Afghan Taliban and pave the way for wider international recognition of their government.
In recent days, the ongoing diplomatic thaw between Pakistan and Afghanistan has fueled speculation that Pakistan might be considering formally recognizing the Taliban government. This idea has gained attention, especially after Russia decided earlier this month to recognize the Taliban government in Afghanistan, becoming the first to do so.
However, Pakistan has not issued any statement that could strengthen this speculation. From Pakistan's perspective, the country's security concerns, especially TTP activities, must be addressed before any such step is taken.
Pakistan has consistently claimed that the Afghan Taliban provide logistical and operational support to TTP fighters. The latest report of the U.N. Security Council's sanctions monitoring team revealed the Afghan Taliban's continued support for the TTP in Pakistan. The report said that 'the status and strength of TTP in Afghanistan had not changed,' but its attacks on Pakistan have significantly increased.
Afghan Taliban authorities recently announced plans to move thousands of Pakistani refugees away from border provinces. The Afghan Taliban usually refer to Pakistani refugees to describe those related to the TTP and their families. It is possible that during his recent visit to Afghanistan, Dar requested Afghanistan to relocate TTP elements. However, the implementation of these plans remains uncertain as the Afghan Taliban continue to deny and reject all reports and claims related to the TTP's presence in Afghanistan.
The $1 billion in bilateral trade over the last six months reflects a shared economic interest and a lot of potential that needs to be tapped. However, the existing political hurdles, particularly TTP-related violence, continue to pose significant challenges to the true potential of bilateral trade.
For now, the path to stability regarding the Afghanistan-Pakistan relationship depends on continued trade, ongoing dialogue, and TTP containment.
This noticeable increase in bilateral trade, while encouraging, may not contribute to determining the future of bilateral relations so long as terrorism remains a major concern.
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