Ghana has adopted the Poverty Reduction Strategy, which emphasizes increased focus on poverty reduction in the design and implementation of its policies. Trade liberalization is defined as the elimination of import and export tariffs on goods and services. Trade liberalization is one of the ways through which poverty could be reduced. However, trade liberalization results in decreased fiscal revenue of the government, which reduces public savings. This fiscal deficit could be financed through increased foreign aid, so that the public savings do not fall. The present study uses the Computable General Equilibrium (CGE) model and examines the impact of trade liberalization; in which lost tariff revenue is compensated by an increase in foreign aid that is redistributed to households via transfers in proportion to their shares in transfer payments, on the poverty and income distributions of various categories of households. The study has shown that elimination of trade related import duties and export duties accompanied by an increase in foreign aid reduces the incidence, depth, and severity of poverty of all categories of households. It is also shown that the income distributions of agricultural households and non-working improve to a larger extent when trade related export duties are eliminated in comparison to import duties accompanied by an increase in foreign aid. On the other hand, the income distributions of public and private sector employees and non-farm self employed improve to a larger extent when trade related import duties are eliminated in comparison to export duties accompanied by an increase in foreign aid.