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Trade with US would fall heavily due to tariff burden, simulation shows
View(s):By Kapila Bandara
Sri Lanka’s exports to the United States are estimated to fall by US$1.62 billion to US$1.82 billion next year due to adjusted tariffs of 20%, compared with US$2.97b in trade in 2023, a simulation shows.
Excluding the adjusted additional tariffs of 20%, the total trade with the US in 2026 would be US$3.44b.
The simulation in a global trade database estimates the direct and indirect impact of the additional tariff burden for Sri Lankan exporters in 2026.
Simulations merely test various scenarios, exploring many variables and their negative or positive impact, and help to visualise issues. The results may not be reflective of actual outcomes, and it can oversimplify the reality. A reworked 20% tariff was imposed on the August 1 deadline by the Trump Administration after high-level Sri Lanka-US trade negotiations, for which President Anura Kumara Dissanayake himself engaged online.
The trade simulation also shows that under numerous tariff lines for apparel, some categories will suffer a drop in value of up to US$174 million as a result of the adjusted reciprocal tariff.
Among apparel exports, the simulation shows the value of trade in the biggest category of “other women’s undergarments’’ dropping to US$100.14m in 2026, down by US$174m, with existing tariffs of 13% plus the 20% additional tariffs.
But without the additional tariffs, the 2026 export value would be US$274.15m, the simulation estimates.
Trade in this tariff line was US$224.8m in 2023, as cited in the simulation under “observed trade’’ in that period.
For knit women’s suits, the drop in trade value would be US$162m with 11.7% existing tariffs plus 20%.
On the other hand, the additional impact on some other categories is not in the hundreds of millions.
The loss in trade value of knitted activewear is estimated at US$44.06m in 2026; the loss of knitted men’s undergarments is US$28.67m; the loss of non-knitted women’s coats is US$8.36m.
For rubber tyres, the drop is US$16.12m; for rubber sheets, there is an adverse impact of US$1.34m, and for used rubber tyres the estimated fall in value is US$24.6m.
The domestic rubber industry has its own distinct challenges.
Mangala Gunasekera, the managing director of the reputed Elasto Group and Textrip, has recently proposed that the rubber industry should manufacture high-performance niche products such as resistance bands for therapeutic use, instead of shipping raw rubber.
Another industry with unrealised potential is precious stones. The trade simulation estimates that precious stone export value would drop by US$12.4m.
For tea, it is a negative US$11.3m outcome, while for cinnamon there is a US$3.886m drop.
Spices export value would come to US$574,743 with an existing tariff of 3.2% plus 20%.
For coconut oil, which is tariff-free, the estimated export value for 2026 is US$32.75m without the additional 20% tariffs. But, with tariffs, the exports would be worth US$27.18m, reflecting a drop of US$5.5m.
Exports of Bangladesh, a competitor of Sri Lanka in the apparel turf, are estimated to increase by US$104m, while those of Vietnam will be higher by US$184m, according to the simulation.
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