National Chamber of Exporters welcomes new US tariff move

• Urges further negotiations, strategic shifts

President Indhra Kaushal Rajapaksa

Secretary General/CEO Shiham Marikar

The National Chamber of Exporters (NCE) of Sri Lanka in a statement said it welcomes the recent revision of US tariff rates on Sri Lankan exports, reducing the previously expected 44% to 30%. 

This development gives Sri Lankan exporters a much-needed advantage over key competitors like Bangladesh (35%), Cambodia (36%), and even China (50%). Only Vietnam and India currently enjoy lower rates, though both countries face complex trade-offs, including geopolitical considerations and internal subsidy programs.

NCE President Indhra Kaushal Rajapaksa said: “This is a positive development, but certainly not the end of the road. We commend the efforts that went into securing this 30% rate, but our exporters are still grappling with mounting input costs, logistics challenges, and limited incentives compared to regional competitors. We strongly urge the Sri Lankan Government to initiate a second round of negotiations with US trade authorities to push for a further reduction—ideally to the 15–20% range—which would be more sustainable and competitive.” 

He further emphasised that Sri Lanka must re-strategise its approach to exports by entering new and niche markets, upgrading to value-added products, and enhancing global positioning through branding, certification, and innovation. According to him, tariff concessions will only go so far—true resilience will come from evolution and strategic transformation.

The recent announcement of up to 30% tariffs on Sri Lankan apparel exports to the US has sent shockwaves across the industry. For a country that exports over $ 3 billion annually to the US, primarily in garments, this is not a minor policy shift—this is a potential game changer. The consequences are severe. Higher tariffs will make Sri Lankan apparel significantly more expensive in the US market, putting pressure on costs and weakening competitiveness. Major US retailers may begin shifting orders to countries with better trade terms, leading to a decline in purchase volumes. A sustained drop in orders will hurt employment, factory margins, and much-needed foreign exchange earnings.

What stings most is the comparison. Vietnam and the Philippines have reportedly secured tariff rates around 20%, while India’s final rate is still pending. If India ends up with a more favourable rate than Sri Lanka, the US mass retail space could become largely inaccessible to local manufacturers. These countries earned better deals either by offering reciprocal access to US goods, committing to trade reform, or simply engaging in sharper, more strategic negotiations. Sri Lanka, on the other hand, has been slow to reform para-tariffs, pursued digital tax policies affecting US tech giants, and even signalled possible alignment with BRICS—all sending the wrong messages at the wrong time.

The missed trade-off is particularly painful. If Sri Lanka had agreed to reduce para-tariffs on US goods—already identified under the IMF reform program—it could have opened a window for negotiation. Even if US imports rose 50%, the impact might have been $ 300 million. In contrast, a 25% drop in US export volumes would cost Sri Lanka $ 750 million in revenue. That’s not just a lost opportunity—it’s a strategic failure.

There is still a narrow window to act. The US has given until 1 August to reopen discussions. The NCE urges the Government to immediately consider deferring the proposed 18% digital VAT targeting Foreign Service providers, which may earn just $ 32 million annually but risks billions in export revenue. More importantly, Sri Lanka must signal its readiness to reform and align its trade posture with key partners. Quiet, professional, and timely diplomatic engagement with Washington is now vital. Failing to act may result in the permanent loss of Sri Lanka’s largest export market, just as regional competitors consolidate their positions.

The rubber export industry, Sri Lanka’s third-largest export sector, now finds itself in a precarious position. The United States accounts for 35% of the industry’s exports, and competing countries such as Malaysia, Vietnam, South Korea, and India enjoy stronger global positions thanks to lower tariffs and more competitive cost structures. The threat is especially severe in the solid tyre segment, which exports over 50% of its global volume to the US With over 90% of global demand for specialised solid and press-on tyres originating from the US market, high tariffs will critically undermine Sri Lanka’s competitiveness. Buyers are likely to shift to suppliers in India and Vietnam, who benefit from significantly more favourable tariff arrangements. Dip products exporters are also vulnerable, with Malaysian and Vietnamese producers facing only 25% and 20% tariffs respectively. These lower rates are likely to drive greater investment and capacity expansion in those countries—further attracting US buyers at Sri Lanka’s expense. The broader socio-economic implications are alarming. Over 200,000 Sri Lankans are directly employed in rubber cultivation and manufacturing, with more than 500,000 indirectly dependent on the industry. The tariff disadvantage may force manufacturers to downsize operations or shift production abroad, while also discouraging much-needed future investment in the sector.

In parallel, the coconut-based industry, while slightly cushioned by the revised tariffs, remains under pressure from rising local input costs and falling yields. Strong competition from India, Indonesia, and Vietnam—supported by Government export subsidies and marketing incentives—has made the global marketplace even tougher. Sri Lanka’s coconut crop fell to 2.68 billion nuts in 2024, with further decline expected in 2025. While the Government has initiated small-scale imports of coconut milk, long-term solutions such as expanding cultivation and shifting focus toward premium, value-added coconut-based products remain essential.

Meanwhile, business and professional service providers remain relatively insulated from the tariff increases due to their niche clientele and limited US market exposure. However, the IT and software sector is showing early signs of stress. Many companies offer cloud-based subscription models reliant on US platforms such as Amazon, Microsoft, and Google. If cloud service costs rise or are taxed further, small Sri Lankan tech firms could lose price competitiveness, potentially prompting relocation abroad and stalling the growth of our IT export economy.

The food and spice segment offers some hope. Traditional Sri Lankan products such as red rice, Ceylon cinnamon, and specialty spice mixes continue to attract strong demand from diaspora communities and niche ethnic markets. While some price sensitivity is expected, the uniqueness and authenticity of these products offer a degree of protection. The NCE believes this sector can expand further into premium categories such as gourmet, organic, and wellness-focused markets, particularly with strategic branding and international certification.

NCE Secretary General/CEO Shiham Marikar stressed the need for urgent action: “While we appreciate the reduction from the originally proposed 44%, the 30% tariff is still burdensome for many of our exporters—especially when competitors enjoy stronger incentives and easier market access. There is still time to renegotiate and reframe our position. But we must act quickly, diplomatically, and with a unified strategy.” He further added that Sri Lanka must focus not only on external negotiations, but also on internal reforms—such as improving production efficiency, securing raw materials, investing in value addition, and targeting underutilised export markets. “We cannot keep depending on a few traditional products and markets. The future lies in high-margin, innovative, and diversified export portfolios.”

The revised tariff rate is indeed a strategic opening—but it is not a victory. The NCE strongly believes that Sri Lanka’s response in the coming weeks will determine the direction of its export economy for years to come. Success will depend on decisive policy action, collaborative diplomacy, and a bold rethinking of how Sri Lanka competes in global markets. The path forward is narrow—but it is still open. What we do now will define whether we gain ground—or give it away.