Corruption generates dual impact on trade represented by sand wheel and grease wheel hypothesis. This study, by using corruption in the custom‘s department, provides evidence in favor of the validity of both the hypothesis in Pakistan, implying that corruption encourages as well as discourages trade. We find that when tariffs are high, corruption boosts the trade by avoiding tariffs. On the other hand when tariffs are low, corruption discourages trade by adding to cost. This proves that the impact of corruption on trade is non-linear. The implication of the findings is that tariff rates should be set at a moderate level. Supervisor:- Dr. Idrees Khawaja