Introduction
On 1 August 2025, the United States is set to impose a 30 percent reciprocal tariff on all Sri Lankan apparel exports—a move that has rattled Sri Lanka’s garment industry. While this is a reduction from the original 44 percent proposal, industry leaders warn that the tariff still leaves Sri Lanka at a stark disadvantage compared to regional competitors. The looming imposition has triggered urgent calls for diplomatic engagement, economic strategy shifts, and a reassessment of Sri Lanka’s position within the global textile supply chain.
A. Background and Tariff Details
The United States’ decision to impose a 30 percent tariff was communicated via a letter from the White House to President Anura Kumara Dissanayake. Although this represents a step down from the initial 44 percent, JAAF maintains the tariff remains onerous and inadequately aligned with global norms
Regional rivals fare better: Vietnam is facing a 20 percent levy following negotiation, Bangladesh is at 35 percent but already in talks for further reductions, and India’s terms are still being finalised
Daily Mirror. Sri Lanka, in comparison, is increasingly vulnerable to losing market share in the fiercely competitive US apparel sector.
B. Economic Stakes and Industry Concerns
Apparel exports represent a cornerstone of Sri Lanka’s economy: in 2024, the sector grossed approximately USD 4.8 billion, with USD 1.9 billion directed to the US market alone—about 40 percent of total apparel revenues—and supporting some 300,000 jobs, predominantly for women
The uplift in tariffs risks eroding Sri Lanka’s competitiveness. A 30 percent import duty on top of existing charges may encourage US buyers to source from nations with more favourable trade terms. JAAF cautions that sustained higher tariffs may spark a migration of orders—which could result in job losses, foreign‑exchange pressure, and a weakened national manufacturing base
C. Diplomatic Pathways Worth Exploring
Negotiations with USTR
JAAF is urging ongoing dialogue with the Office of the US Trade Representative to achieve parity with competitors. The Ceylon Chamber of Commerce also praised the reduction from 44 percent to 30 percent as “a constructive and important first step,” and urged further engagement
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Bilateral Economic Agreement
Deputy Minister Anil Jayantha has floated the possibility of finalising a bilateral trade agreement before the 1 August deadline—an initiative the government should pursue activelyDaily Mirror
Domestic Policy Support
To buffer industries against the impact of the tariff, the Sri Lankan government could consider targeted tax reforms—such as easing business levies and power costs. Industry advocates suggest cost rationalisation measures, including trimming executive perks and focusing on ‘value engineering’ .
D. Regional Context and Competitive Analysis
Sri Lanka must view these tariff changes through a regional lens:
Vietnam enjoys a negotiated 20 percent tariff, rendering it the most competitive alternative.
Bangladesh, currently at 35 percent, is proactively pursuing reductions, which may soon challenge Sri Lankan exporters.
India and Cambodia are also reportedly engaged in talks and may secure more advantageous terms
Failing to match or exceed these concessions risks a shift in sourcing patterns. Suppliers must act swiftly to shore up resilience—both diplomatically and within business operations.
E. Strategic Imperatives for Sri Lanka
Assertive Diplomacy
Schedule bilateral sessions with US officials before 1 August.
Build coalitions with other affected exporters (e.g. Bangladesh, Cambodia).
Mobilise local export federations and chambers for a unified lobbying front.
Export Market Diversification
While the US is the primary importer, Sri Lanka must explore deeper ties with other markets—such as the EU, UK, and regional free-trade zones—to reduce dependency and future-proof against policy shifts.
Cost Optimisation and Process Innovation
Encourage lean manufacturing principles and energy-efficient systems.
Reassess non-essential expenditures within companies.
Invest in value‑added strengths: Sri Lanka’s reputation for ethical sourcing, compliance, and product quality must be leveraged.
Government Support Measures
Introduce temporary waivers or low-interest loans for SMEs.
Provide training and advisory services to enhance operational efficiencies.
Negotiate tariffs holistically, including benefits tied to labour rights and environmental compliance.
F. Broader Economic Ripples
The apparel industry’s downturn would ripple across the national economy:
Unemployment Pressure: Job losses—especially among women—could deepen social inequality.
Foreign Exchange Shortfall: Apparel exports contribute significantly to Sri Lanka’s USD inflows; reduced revenues may intensify balance‑of‑payments strains.
Investor Sentiment: Export performance drives investor confidence. Persistent tariff issues could detract from foreign investment, notably in linked sectors like ports and logistics.
G. Conclusion
The imposition of a 30 percent US tariff is no small challenge—but neither is it an insurmountable one. Sri Lanka stands at a critical juncture:
Riyadh-level diplomatic efforts could help secure more favourable tariff terms.
Domestic reforms would make local manufacturers leaner, more cost-effective, and better able to withstand shocks.
Diversification offers insurance against geopolitical volatility.
Failing to act now threatens not only current revenues but the long‑term viability of Sri Lanka’s export economy. In contrast, a smart policy blend of diplomacy, diversification, and industrial innovation could turn this challenge into an impetus for transformation.
