This research aims to analyze and measure the relationship between customs duties and the trade exchange between Iraq and Egypt during the period 2004–2024, after converting the data into quarterly form. The Autoregressive Distributed Lag (ARDL) model was applied to capture the short- and long-run effects of this relationship. The importance of the study lies in its attempt to explore how customs policy reforms can enhance trade volume and serve the mutual economic interests of both countries. The central hypothesis assumes that customs duties directly influence the size and direction of trade exchange, and that policy coordination contributes to achieving a more balanced trade relationship. The findings reveal a statistically significant positive relationship at the 5% level in the short run, indicating that an increase in customs duties leads to a rise in trade exchange by 0.307246 units. However, the first lag showed a negative effect of –0.317288 units, reflecting the dynamic and time-varying nature of the impact. In light of these results, the study recommends reconsidering the existing customs duty structure between Iraq and Egypt in a way that reduces trade costs, facilitates the flow of goods, and fosters more balanced and sustainable bilateral economic relations.