Plantation sector sounds alarm over 30% US tariff

• Calls on Govt., to engage directly with USTR seeking relief for agricultural commodities like tea and medical-grade rubber
• Cites tea and rubber as vital sectors for rural employment, conducts strong ethical and sustainability credentials in global markets
• Advocates for temporary relief measures for affected producers, including duty drawback schemes, retraining programs for affected workers, export marketing assistance to mitigate disruptions

The Planters’ Association of Ceylon (PA) has expressed grave concern over the United States’ decision to impose a 30% tariff on Sri Lankan tea and rubber exports, set to take effect from 1 August. The Association warns that this move could devastate two of Sri Lanka’s most historic and employment-intensive sectors, tea and rubber undermining decades of market-building and trade diplomacy.

PA is calling for urgent interventions, particularly as key competitor nations like Vietnam and India are already in talks to secure reduced tariffs, while Indonesia has already finalised a preferential trade deal. 

Issuing a statement, PA is urging the Government to engage directly with the US Trade Representative (USTR), seeking relief for agricultural commodities like tea and medical-grade rubber. These sectors are vital for rural employment and carry strong ethical and sustainability credentials in global markets.

The association is also advocating for temporary relief measures for affected producers, including duty drawback schemes, retraining programs for affected workers and export marketing assistance to mitigate immediate disruptions. It further emphasised the need for market diversification and long-term investment in branding and innovation, to safeguard the country’s competitiveness and resilience.

Tea industry at a critical juncture 

Ceylon tea had enjoyed a zero-duty access to US markets and with this move, there will be 30% percent duty slammed on tea exports. This decision for 30% will affect the country’s tea exports to the US markets. In 2024, the US imported 6.4 million kilograms of Ceylon Tea, valued at $ 45 million, reflecting a 22% increase in volume and an 11% increase in value over 2023. 

Plantation... 

Of these exports, 65% were value-added products such as packaged, blended, flavoured and instant teas, indicating strong demand for premium Sri Lankan offerings.

“The average FOB price of tea exported to the US stood at $ 7 per kg, significantly higher than the national average of $ 5.83 per kg in 2024, highlighting the premium positioning of Sri Lankan tea in the US market,” said Tea Exporters Association former Chairman Ganesh Deivanayagam.

Sri Lanka also commands a 20% share of the US hot tea segment, despite the market being dominated by iced tea (80% of consumption). With annual tea consumption in the US growing at around 6%, the country remains a critical market for high-value, differentiated tea products from Sri Lanka.

The timing of the tariff is especially damaging. As of 11 April, nearly 300,000 kg of tea valued at $ 3.24 million was already en route to the US and an additional 21,000 kg worth $ 479,000 was awaiting clearance at US ports. Following the tariff announcement, confirmed orders for 225,970 kg valued at $ 3.14 million were suspended. Although recent reports indicate some shipments are now being cleared by buyers willing to pay a 10% duty, the uncertainty has disrupted cash flows and confidence among exporters.

The US market plays a critical role in supplementing Colombo auction prices, which has a direct impact on the livelihood of the plantation workers and the small holders.

Rubber sector on the brink

The rubber industry is facing a similarly dire outlook. With over $ 330 million in annual exports to the US primarily solid tyres, medical gloves, and PPE, the new tariff has already led to order suspensions and growing investor anxiety.

The 30% tariff makes Sri Lanka non-competitive overnight as we will lose ground to Vietnam and India, who are actively negotiating better terms. As a sector supporting over 150,000 livelihoods and contributing nearly a billion dollars to the economy, this is a serious threat to our survival. 

Some Sri Lankan firms have already paused shipments, anticipating long-term buyer migration to cheaper alternatives. With 80% of global demand for Sri Lanka’s solid tyres coming from the US, the threat is immediate and substantial.

The broader consequences such as stalled foreign direct investment, rural economic uncertainty and no viable fallback for communities dependent on long-gestation crops like rubber.