US Tariff relief offers reprieve for Sri Lanka
A high-level US trade delegation is in Colombo this week to discuss the outcome of Washington’s 20 per cent tariff on Sri Lankan exports and explore steps toward a more balanced trade relationship.
The team met President Anura Kumara Dissanayake on Thursday with both sides framing the talks as a chance to stabilise commerce strained by shifting US trade policy, Finance Ministry sources said.
At stake is more than tariff relief. While Washington agreed to reduce the levy from a punishing 44 per cent to 20 per cent, it expects Sri Lanka to open its doors wider to American goods in return.
In 2024, Sri Lanka exported around US$ 3 billion mainly garments and rubber goods to the US, while imports from America amounted to just $ 370 million. Bridging this imbalance has become central to US demands.
Officials close to the talks say the US team is pressing for market access in machinery, agriculture, and consumer goods, sectors where Sri Lanka’s local producers already struggle.
Economists warn that meeting such commitments without a broader strategy could weaken domestic industries and aggravate the very vulnerabilities that plunged the country into crisis in 2022.
University of Colombo economist and Central Bank Monetary Policy Board member Prof. Priyanga Dunusinghe cautioned that Sri Lanka’s approach has been narrowly limited to tariff negotiations.
“Export diversification has not progressed, the business environment remains weak, and productivity has not improved, leaving Sri Lanka exposed to external shocks like the recent US tariff hike,” he said at the a recent CEO Forum 2025.
A recent Institute of Policy Studies (IPS) study has already projected losses of $ 634 million in export earnings under the new tariff regime, highlighting the heavy toll on apparel the single largest contributor to exports. Still despite these risks, Colombo is yet to move beyond ad hoc bargaining.
The global context makes the challenge sharper. Washington’s new protectionism targets goods trade deficits while excluding services, where Sri Lanka depends heavily on US technology flows.
This tactic reflects wider apprehensions about Asia’s rise with China, India, and Indonesia among the uppermost global economies by 2030. The situation is gradually hostile for small countries without geopolitical leverage,
Prof. Dunusinghe gave the example of Singapore as a good counter-factual. Within weeks of the US tariff action, it had rolled out a five-pillar strategy building competitiveness, driving innovation, re-skilling the workforce, supporting transitioning industries, and developing linkages with open-trade nations. “Sri Lanka has not moved beyond talks on tariff concessions. Heavy dependence on apparel exports continues, and no systematic reforms have been implemented to expand products or markets,” he warned.
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