23 hours Ago By Thilina Walpola
Sri Lanka’s export sector is grappling with a significant challenge following the United States’ decision to impose a 44% reciprocal tariff on Sri Lankan goods. This steep tariff threatens the country’s trade with the U.S.
, particularly in the apparel industry, which serves as a cornerstone of Sri Lanka’s economy. Tea and Other Exports Also Under Threat The repercussions extend beyond apparel, with tea exports at risk due to increased costs that may reduce Sri Lanka’s competitiveness against major producers like India, Kenya, and China. Other key export segments, including spices, seafood, and coconut-based products, are also likely to face price pressures, making it difficult for Sri Lankan exporters to sustain their foothold in the U.
S. market. Given that the United States is a major buyer of Sri Lankan goods, this move raises concerns about trade competitiveness, long-term sustainability, and economic stability.
The question now is: how will this tariff impact Sri Lanka’s export-driven industries, particularly apparel, and what strategies can be employed to counteract the effects? A Major Blow to the Apparel Sector – Sri Lanka’s Leading Foreign Exchange Earner Ambassador Kana Kananathan, former High Commissioner to Kenya, has warned that this development could severely impact the apparel sector, which accounts for nearly 40% of Sri Lanka’s total exports. With U.S.
buyers contributing approximately $3.3 billion annually, the apparel trade constitutes a crucial revenue stream for the nation. A 44% tariff would substantially raise the cost of Sri Lankan apparel, making it less competitive compared to manufacturers in Bangladesh, Vietnam, Cambodia, and India.
This could lead to a significant drop in orders from American buyers, posing a serious threat to the industry’s growth and employment rates. Navigating the Challenge: Government and Industry Response While immediate government intervention is necessary to mitigate these effects, businesses must also take proactive measures. Innovation, market diversification, and strengthening supply chain resilience will be essential strategies for overcoming these trade barriers.
With the right approach, Sri Lanka can navigate this challenge and position itself more robustly in the global marketplace. Ambassador Kananathan also suggested that exporters explore the ‘1/3 Cost-Sharing Model’ as a potential solution. Under this approach: = Sri Lankan Manufacturers accept a partial reduction in profit margins, ensuring their products remain competitively priced.
= U.S. Retailers and Brands agree to absorb a portion of the tariff, recognizing the value of maintaining a reliable Sri Lankan supply chain.
= Raw Material Suppliers provide pricing flexibility, such as offering discounts or extending credit terms, to help offset cost increases. By adopting these strategic adjustments, Sri Lanka’s export industry can mitigate the immediate impact of the tariff while laying the foundation for long-term trade resilience. ( Ambassador Kananathan was Sri Lanka”s former High Commissioner to Kenya and with concurrent accreditation to 23 African countries as well as Sri Lanka’s Permanent representative to UNEP and UN Habitat).
