CBSL Chief dismisses likelihood of 44% tariff on Sri Lankan exports amid US trade tensions

Monday, 19 May 2025 03:19 - - {{hitsCtrl.values.hits}}

CBSL Governor Dr. Nandalal Weerasinghe

Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe last Friday stated that the imposition of a 44% reciprocal tariff on Sri Lankan exports to the US is unlikely, citing ongoing diplomatic engagement and recent developments in global trade policy.

He made these remarks at a public lecture organised by the CBSL titled ‘State of the Economy as Reflected in the Annual Economic Review 2024’ last Friday.

Responding to concerns over the 90-day tariff pause currently granted to Sri Lanka by the US, Dr. Weerasinghe said that early discussions with the US Trade Representative’s Office had already taken place and there was time for negotiations.

“I don’t think it (44% tariff) is a likely scenario given that the Government already had discussions with the US authorities at the earliest stages,” he said.

Noting that the US agreed to cut the extra tariffs it imposed on Chinese imports last month to 30% from 145% for the next three months, while China committed to cutting duties on US imports to 10% from 125%, the Governor said: “There is a ‘less probability’ of having going back to that kind of extreme scenario.”

However, Dr. Weerasinghe said that while some level of tariffs may be imposed, Sri Lanka now has time to negotiate measures.

Despite the subdued tariff threat, CBSL Economic Research Department Director Dr. S. Jegajeevan said the bank is keeping a close tab on global economic headwinds.

Presenting the CBSL’s Annual Economic Review, she outlined that the International Monetary Fund (IMF) projects global growth to decelerate to 2.8% in 2025, while the World Trade Organisation (WTO) has revised the global merchandise trade volume projection for the year to -0.2%.

She noted that rising trade uncertainty and increasing economic fragmentation could dampen investment, distort trade flows, and disrupt supply chains.

Dr. Jegajeevan also highlighted potential negative implications for Sri Lankan exports, particularly due to high dependence on the US market.

“Export sectors such as garments and textile articles (65%), rubber products (11%), coconut products, iron and steel articles, and toys could face increased risk if US tariffs materialise,” she said.

On inflation and monetary policy, the CBSL anticipates uncertain inflationary effects stemming from trade restrictions. Monetary responses, she noted, would depend on country-specific outcomes and broader global financial shifts such as higher-for-longer interest rates, capital flow disruptions, and tightened external conditions.

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