The United States has reduced its tariff on Sri Lankan exports to 20%, down from an initial 44% imposed in April, offering relief to the island’s $3 billion export sector, particularly its apparel industry. The decision, announced under President Donald Trump’s Executive Order 14257 on July 31, 2025, follows months of negotiations and takes effect August 7. Sri Lankan officials, however, continue talks to push for rates below 20% to match competitors like Vietnam and Bangladesh, both at 20%, and Pakistan at 19%.

The tariff, initially set at 44% in response to Sri Lanka’s alleged 88% duties on U.S. imports, was cut to 30% in July after Colombo offered trade concessions. The apparel sector, accounting for 64% of Sri Lanka’s $1.8 billion U.S. exports in 2023, faced a projected 20% drop ($300 million) under the higher rate. Industry leaders, including the Joint Apparel Association Forum, warn that even 20% erodes competitiveness, as rivals face lower duties.

Sri Lanka’s economy, recovering from a 2022 financial crisis with 5% growth in 2024 aided by a $2.9 billion IMF bailout, remains vulnerable. The International Monetary Fund flagged the tariff as a risk to macroeconomic stability. Exporters fear order shifts to peers like India (25%) if rates don’t align further. A Sri Lankan delegation, led by Acting Finance Minister Dr. Anil Jayantha, is in Washington, D.C., pushing for parity before the deadline.

Also Read: BJP Counters MK Stalin's demand to PM Modi to Resolve Katchatheevu Dispute

The U.S. also introduced a 40% anti-transshipment duty to curb tariff evasion, impacting Sri Lanka’s apparel logistics. Despite the reduction, opposition leader Sajith Premadasa criticized the government’s “weak” negotiations, claiming $3 billion in exports are at stake. Central Bank Governor Nandalal Weerasinghe called the 20% rate progress but urged deeper cuts to safeguard 300,000 apparel jobs.

Also Read: Child’s Remains Unearthed in Sri Lanka’s Chemmani Mass Grave