Challenges ahead for Sri Lankan exports to US
Sri Lanka’s opportunities in the US market are on the edge as it remains challenged due to the stiff competition from competing neighbouring countries as tariff measures may have to be partially absorbed.
A group of key persons from the industry participated at a recent discussion on the US tariffs and its impact on Sri Lanka highlighting the concerns that they raise for the country going forward.
Damro Group and Agalawatte Plantations Director Manoj Udugampola noted that the revised US tariffs are more than a trade adjustment and that they are a stress test for Sri Lanka’s plantation economy and rubber industry. These sectors, he pointed out are not just export engines; they are lifelines for rural communities, estate workers, and smallholder farmers.
In a bid to avert this challenge Sri Lanka needs to adopt a strategy that balances competitiveness with compassion – modernising production, diversifying markets, and protecting the livelihoods of those who power our exports.
Mr. Udugampola said the rural economy and employment will be badly affected. The rubber sector is no more a profitable industry with the extent of rubber plantations also reducing and many smallholders moving out of the sector.
In addition the SVAT repayments have become a growing concern as some companies participating at the auctions state that their payments have been delayed by about three years and as a result the price at the market drops as they do not want to block their money.
Apparel association (JAAF) Deputy Chairman Felix Fernando said his main concern was the fact that the US is mainly a buyers’ market. And as a result of the imposition of an additional 20 per cent tariff on all goods from Sri Lanka, this may not be passed down to the consumers.
This means that the buyers will request to share the duty component with the producer, he noted.
Under these circumstances, some countries like Bangladesh will give in to the buyer to ensure the buyer is kept happy – then what will happen to countries like Sri Lanka, Mr. Fernando queried.
In fact, when prices of goods are increased compared to pharmaceuticals and edibles, one of the first to be dropped from the list of goods would be fashion and apparel.
“So considering this we have realised we expect an overall decline in demand” and buyers will shift from Sri Lanka to other locations.
Some of the key recommendations highlighted at the discussion were on bilateral talks, trade agreements and export incentives that the government will have to engage in. It was pointed out that it is important to engage the US trade officials to explore tariff relief or sector –specific exemptions. In addition in terms of trade agreements the authorities need to fast-track regional deals with groupings like ASEAN and the EU to reduce dependency on US markets. As part of offering export incentives the government needs to offer tax breaks and subsidies to exporters in affected sectors.
Industry wise, the apparel sector can invest in sustainable production and digital supply chains; partner with global brands for co-branding opportunities. The coconut sector could engage in promoting Sri Lankan origin labeling and premium positioning. In addition they can diversify into health and wellness markets. The rubber sector needs to enhance R&D for product innovation like eco-rubber; and build strategic alliances with buyers in Europe and East Asia.
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