Saga of Trump’s tariffs
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At a recent red carpet engagement in Colombo, I heard someone shout “Hey Mr. Tariff” as we were walking into the hall. Turning around, I saw an influential apparel industrialist smiling away. I returned the smile – realising that the reference was to journalists closely following the saga of US tariffs.We keep returning to President Donald Trump’s tariffs – Sri Lanka was slapped a tax of 20 per cent effective from August 7 – as there have been multiple developments in between the kick-off dates of the new tariffs. The drama is unfolding in all kinds of directions, confusing the industry and may have affected winter orders and next year’s spring (March-May) which is currently in production.
On August 29, a US appeals court decreed that most of Trump’s tariffs are illegal. The court, however, allowed the tariffs to remain in place through October 14 to give the Trump administration a chance to file an appeal with the US Supreme Court, according to a Reuters’ news agency report. It added that Trump has made tariffs a pillar of US foreign policy in his second term, using them to exert political pressure and renegotiate trade deals with countries that export goods to the US. Will the August 29 decision by the US appeal court provide some space to local garment manufacturers? It remains to be seen.
As I reflected on these developments, the home phone rang. The call was from Kalabala Silva, the often agitated academic.
“I say…..how is the garment industry performing after Trump’s tariffs’ imposition?” he asked. “I think the industry has taken it in their stride that these tariffs are inevitable, given the huge US trade deficit with countries that export to the US,” I said. “Will these tariffs impact the garment workforce,” he asked again. “Hard to say, we need to wait and see the situation in the coming months,” I said.
As per the export data for the period January to July 2025, exports have done well. This might change when the export data for August and the months thereafter are collated, when the new tariffs kick in. According to the Export Development Board (EDB), Sri Lanka’s export sector has “demonstrated remarkable resilience and steady momentum” during the first seven months of 2025. Total exports have reached US$ 9,992.53 million, a handy growth of 7.79 per cent growth compared to the corresponding period in 2024.
In July 2025 alone, total exports, comprising both merchandise and services reached $ 1,641.11 million, recording an “impressive” 12.68 per cent year-on-year growth over July 2024. Export earnings from apparel and textiles slightly increased by 8.15 per cent y-o-y to $ 479.90 million in July 2025, compared to July 2024.
Exports to the US, Sri Lanka’s largest single export destination accounting for 23 per cent of country’s merchandise exports, increased by 2.64 per cent to $ 274.07 million in July 2025, compared to July 2024. Exports to the US increased by 4.29 per cent over the cumulative period from January to July 2025, reaching $ 1,709.06 million, the EDB said.
According to Sri Lanka’s apparel industry officials, the new US appeals court ruling is expected to be challenged by Trump with a likelihood of the status quo on tariffs remaining. How is the industry bracing itself to the new challenges? As of now, orders for the winter season in the US (and Europe) are tapering out and current production is focused on orders for the spring season.
The manufacturers and buyers are sharing the increased tariffs without passing it to the consumer, industry officials say. “We are not increasing prices of the product to the consumer,” one official said, adding that most manufacturers are also looking at the supply chain to see whether costs could be optimised or reduced. Increasing productivity and reducing wastage are another aspect that manufacturers are looking at closely. Whether ‘wastage’ means cutting incentives to workers remains to be seen, an issue that trade unions are worried about.
Only after the dust settles in coming months – after the bout of appeals and counter-appeals on Trump’s tariffs ends – will the industry take a closer look on the way forward for Sri Lanka’s most vital export commodity. A silver lining in this entire process connected to the US tariffs is that Sri Lanka’s exports to the UK would be more favourable after that country offered generous concessions to local exporters.
At this point of writing the column, I walked into the kitchen to fetch my second mug of tea and happened to overhear the conversation of the trio (on this Thursday morning) under the margosa tree.
“Loku deshapalana gataluwak athi wewida parana janadhipathi-warunge nivasa deemanawa navath wunama (Will this issue of former presidents not getting a housing allowance be a big political problem)?” asked Mabel Rasthiyadu. “Mama hithanney nae eka wevi kiyala, mokada meka gana sakachcha karala thiyenawa nae maasa gananawakata (I don’t think so, as this move has been discussed for several months),” said Serapina.
“Mama balaporoththu wenawa Mahinda Rajapaksa janadhipathi-warayage arakshawa adu nokarai kiyala (But I hope former President Mahinda Rajapaksa’s security is not reduced),” said a worried Kussi Amma Sera. “Mama danna vidihata, arakshawa adukarana eka aluth prathipaththiye nae (From what I know, the new policy doesn’t apply to reducing security),” added Serapina.
Another challenge to exporters, according to a report by the Institute of Policy Studies (IPS), is the EU’s new Deforestation Rules (EUDR) which take effect on December 30, 2025. This regulation aims to prevent deforestation associated with seven commodities – cattle, cocoa, coffee, palm oil, soy, wood and natural rubber – and products derived from them, such as tyres, chocolate and wooden furniture. Any product exported to the EU market must be deforestation-free, legally produced according to the laws of the originating country, IPS said.
The EU is a significant destination for these value-added exports, emphasising the importance of meeting EUDR requirements. Between 2022 and 2024, Sri Lanka exported an average of $ 329 million worth of EUDR-covered products to the EU annually, with natural rubber products accounting for 97.5 per cent of this value, IPS added.
In another development, a Sunday Times Business report said recently that India and Bangladesh are looking at opportunities available in Sri Lanka to export their products to the US following the recently imposed high tariffs on imports to the US and political stability. This is because India is facing a 50 per cent tariff to the US, while political uncertainty in Bangladesh may find that country looking at other manufacturing facilities in Sri Lanka to service their US order book.
Be that as it may, the real impact of the US tariffs on Sri Lanka’s exports would only be known in the coming months, when exporters settle down to a new tariff structure and see how it pans out in terms of US buyers and whether it impacts US consumer spending.
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