Sri Lanka apparel sector braces for tariff fallout
US President Donald Trump has expanded his aggressive trade policy by adding Sri Lanka to a growing list of nations subject to sweeping new tariffs.
In a letter, Trump recently announced that beginning August 1, 2025, all goods imported into the United States from Sri Lanka will be subjected to a 30 per cent tariff. This measure is part of a broader initiative that also includes Algeria, Libya, and Iraq among seven countries targeted in the latest round of trade penalties.
“From August 1, 2025, we will impose a tariff of 30 per cent on all Sri Lankan products entering the United States, separate from all existing sectoral tariffs,” the letter reportedly underlined.
Trump also reportedly made it clear that any retaliatory action from the Sri Lankan government—such as raising tariffs on US goods—would be met with proportional responses. The letter stated that if Sri Lanka responded in kind, the 30 per cent tariff would be increased accordingly.
The move marks a significant escalation in Trump’s ongoing campaign to rebalance America’s trade relationships, and while the 30 per cent rate is slightly lower than the 44 per cent initially proposed in April, its implications for Sri Lanka’s garment industry and its overall economy could be substantial.
“Even though from the proposed tariff of 44 per cent to the current 30 per cent there is climbdown, it is still very significant and would have very negative impact on the industry as countries like India and Vietnam have lower tariffs than Sri Lanka,” opined Yohan Lawrence, secretary general of Joint Apparel Association Forum (JAAFSL), speaking to Fibre2Fashion.
United States is Sri Lanka’s largest single export destination, accounting for 23 per cent of its total merchandise exports in 2024, reports maintained adding, among the most affected sectors will likely be the apparel industry, which represents more than 70 per cent of Sri Lanka’s exports to the US.
Other important exports include tea, rubber, and seafood—all industries that could face substantial disruption if the tariffs take effect as planned.
For Sri Lankan exporters, the tariffs threaten to undercut competitiveness in a critical market, potentially leading to job losses and reduced foreign exchange earnings at a time when the country is still recovering from a deep economic crisis.
Meanwhile, John De Silva, managing director of Jia Moda Private Limited told Fibre2Fashion, “The new tariff imposed by US on Sri Lanka is going to pose a massive challenge for the apparel industry. This could mean a shift of orders to competing countries like Vietnam.”
However, De Silva noted that Vietnam’s limited capacity presents a different challenge—a surge in US orders could lead to saturation, creating a new hurdle for brands and importers in the US to navigate.
As per Lawrence, the total tariff amount would be even higher when the average MFN tariff of 12–14 per cent that Sri Lanka has been paying is added to the current 30 per cent reciprocal tariff.
In his letter, Trump framed the decision as a response to what he described as long-standing inequities in trade between the United States and Sri Lanka. He argued that the trade relationship had been “far from reciprocal”, citing the South Asian nation’s tariff structures, non-tariff barriers, and policies that he claimed disadvantage American exporters and businesses.
The US President concluded the letter on a cautiously optimistic note, expressing hope for a more balanced and mutually beneficial partnership in the future even as he reportedly left the door open to revising the tariff “upward or downward” depending on how relations between the two countries evolve in coming months.
“It is still not the end of the road as the government has indicated it will continue talks with the US in the coming days and there is still hope that the margin of tariff might come down,” expressed Lawrence even as he pointed out that the impact of the new tariff will vary depending on the market mix each Sri Lankan supplier serves, affecting both business operations and employment levels.
Echoing Lawrence’s sentiment, De Silva remarked, “I also believe that once the US achieves its broader objectives, the tariff rates will eventually come down, as higher tariffs will ultimately have a negative impact on American consumers.”
Purchase orders from US buyers nonetheless are coming in, noted De Silva, who made a curious observation indicating that some importers already seem to be planning to adjust their selling prices to account for the impact of the tariff.
On the flip side, De Silva explained that “higher product prices will mean consumers pay more, which could drive up inflation in the US. In addition, importers and retailers may face shrinking business, potentially resulting in store closures and reduced operations in the years ahead.”
He, however, concluded on an optimistic note, stressing that although much like the COVID-19 pandemic, Trump’s tariffs will have global repercussions, but “eventually, everyone will find a way to adapt and navigate through them”.
