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US Imposes 30% Tariff on Sri Lankan Exports: Economic Impact and Political Response



The United States has announced a 30% tariff on all goods imported from Sri Lanka, set to take effect on August 1, 2025, marking a significant escalation in trade tensions between the two countries. The move follows months of negotiations and comes as part of a broader US trade policy targeting several nations with steep reciprocal tariffs.


Background: From 44% to 30% - A Hard-Fought Reduction

Initially, the US administration had proposed a 44% tariff on Sri Lankan imports in April, citing concerns over what it described as Sri Lanka’s “tariff, non-tariff policies, and trade barriers” that contributed to a persistent trade deficit with the US. After a 90-day grace period and intense diplomatic engagement, Sri Lanka secured a reduction to 30% — the largest tariff cut among all countries targeted in the latest round of US trade actions.


US Rationale and Warnings

In an official letter to President Anura Kumara Dissanayake, US President Donald Trump stated that the tariffs were necessary to “correct the many years of Sri Lanka’s tariff, and non-tariff, policies and trade barriers” and warned that any retaliatory increase in Sri Lankan tariffs would be met with a corresponding increase by the US. The letter also offered a proposal: Sri Lankan businesses could avoid the tariff by establishing manufacturing operations within the United States, with promises of expedited approvals.


Sri Lankan Government Response

Deputy Foreign Minister Arun Hemachandra described the reduction from 44% to 30% as a “positive moment” for Sri Lanka, crediting “quiet, determined diplomacy” for the breakthrough. Treasury Secretary Harshana Suriyapperuma called the tariff cut a “good start” and confirmed that negotiations with the US would continue in hopes of further reducing the rate before the August deadline.


Economic Impact: Exports, Jobs, and Uncertainty

The United States is a key market for Sri Lankan exports, especially garments, which account for about 40% of Sri Lanka’s export earnings to the US. Industry analysts warn that the 30% tariff will make Sri Lankan goods less competitive, potentially reducing demand, threatening jobs in the apparel sector, and widening the country’s trade deficit. Other exports, such as solid tyres and ceramics, may also feel the pinch, though the impact on tea exports is expected to be minimal due to the US’s relatively small share of Sri Lanka’s tea market.


Economists note that while the reduction from the initially proposed 44% tariff is a relief, the new 30% rate still poses a serious challenge for Sri Lanka’s export-driven economy. The government is being urged to seek new markets, lower production costs, and implement policy reforms to mitigate the fallout.


The Road Ahead

Sri Lanka’s government has pledged to continue diplomatic efforts with the US, aiming for further tariff reductions or exemptions. Officials have also called for exporters to diversify markets and improve competitiveness to weather the storm. As global trade tensions rise, the outcome of these negotiations will be critical for Sri Lanka’s economic stability and growth in the coming years.

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