These days the domestic growths of countries are related to liberalization and internationalrndonors are highly preaching its importance for less developed countries in particular. Thernpurpose of this paper is therefore to estimate the impact of trade liberalization on Ethiopianrneconomic growth. The massive reform undertaken in 1992 taken as a structural break, thernstudy uses a time series data ranging from 1970 to 2009. Two-Stage Least Squares (2SLS)rnregression and Error Correction Method (ECM) methods were used to examine thernrelationship of trade liberalization with export, import and GDP. The empirical resultsrnindicate that the trade reform had positive impact on both imports and exports whereas itsrnimpact on imports is faster and higher than that of exports, worsening the trade balances.rnThe result also shows that trade liberalization had negative impact on GDP growth as resultrnof its worsening effect on trade balances. Therefore, the study suggests that the countryrnshould increase its exports to reap the jidl benefit of trade liberalization. Diversifyingrnexportable through incentives, creating enabling environment for foreign direct investmentrnand improving policy and institutions of the country are the policy implication of the study tornget out of the worsening trade balance.rnKey words: Trade Liberalization, Economic growth, Export Growth, Import growth, timernseries analysis and Ethiopia.