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Colombo, April 5 (Daily Mirror)- The Sri Lankan government is expected to initiate prompt discussions with the US government regarding possible relief measures following the introduction of the US reciprocal tariffs, the President's Media Division (PMD) said. A discussion was held at the Presidential Secretariat between President Anura Kumara Dissanayake and the Committee appointed to submit recommendations on the new U.S. reciprocal tariff system. During the meeting, the Committee's proposals concerning the country's strategic response to the imposition of these new tariffs, as well as the next steps that should be taken were reviewed in detail. The Committee is represented by Senior Economic Advisor to the President Duminda Hulangamuwa, Secretary to the Ministry of Finance Mahinda Siriwardana, Governor of the Central Bank Dr. Nandalal Weerasinghe, Secretary to the Ministry of Trade A. Vimalaneththiraja, Chairman of the Export Development Board Mangala Wijesinghe, Senior Director General (Bilateral) of the Ministry of Foreign Affairs, Dharshana M. Perera, Chief Economic Policy Advisor at the Ceylon Chamber of Commerce Shiran Fernando, Group CEO of Brandix Ashroff Omar, Co-Founder of MAS Holdings Sharad Amalean, Chairman of the Heyleys Group Mohan Pandithage and Ananda Caldera. Minister of Labour and Deputy Minister of Economic Development Anil Jayantha Fernando, and Deputy Minister of Finance and Planning Harshana Suriyapperuma also attended he meeting.

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The International Monetary Fund (IMF) has appealed to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty due to the reciprocal tariff imposed by the US. IMF Managing Director Kristalina Georgieva said in a statement that the IMF is still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. “We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth. It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty,” she said. “We will share the results of our assessment in the World Economic Outlook, which will be published at the time of the IMF/World Bank Spring Meetings later this month," she added.

Ada Derana

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The Government of Sri Lanka says it stands ready to engage with the US administration at the earliest opportunity to explore ways to manage the trade balance in a fair manner and that it is committed to substantially reducing tariff and non-tariff barriers that hinder trade and investment. On Wednesday, US President Donald Trump announced a sweeping set of reciprocal tariffs, imposing a baseline 10 per cent tax on all imports and significantly higher rates on dozens of countries with which the US runs trade deficits. Sri Lanka is facing one of the steepest tariffs among countries amounting 44 per cent. The Government of Sri Lanka said it recognizes the evolving trade landscape with the United States looking to address trade imbalances through reciprocal tariffs. “This tariff is set at 44% which is significant as Sri Lanka exports USD 3 billion to the US,” Sri Lanka’s Finance Ministry said, issuing a statement to clarify the government’s stance on the tariffs. The Government reaffirmed its strong commitment to deepening economic ties with the US, a longstanding friend and trusted trading partner. Sri Lanka is engaged in an IMF Extended Fund Facility since March 2023 as part of its recovery from the unprecedented economic crisis and successfully completed the Third review of the programme. In this context, Sri Lanka said it appreciates the steadfast support extended by the US in supporting Sri Lanka’s economic recovery, in particular the support in the external debt restructuring efforts. “We have now stabilized our economy and on a steady growth path of 5% in 2024. Considering our export exposure and potential slowdown in global demand, we are concerned that our recovery path could be constrained,” the statement said. “The Government stands ready to engage with the US administration at the earliest opportunity to explore ways to manage the trade balance in a fair manner.” “We are committed to substantially reduce tariff and non-tariff barriers that hinder trade and investment,” the Finance Ministry said. “Improving the ease of doing business remains a top priority of the Government, as we strive to create an environment that encourages innovation, fosters commercial partnerships, and unlocks opportunities for both nations. In conclusion, by working together, our countries have the opportunity to usher in a new era of growth, and shared prosperity for both our nations.”

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The Colombo Rubber Traders Association (CRTA) joined the bandwagon in expressing deep concern about the recent imposition of a 44 percent blanket tariff by the United States on all imports from Sri Lanka and said it is particularly worried on the “devastating impact” it would have on Sri Lanka’s natural rubber industry. As one of the country’s key export sectors, the natural rubber industry contributes significantly to both employment and foreign exchange earnings. Since the present tariff is 12.5 percent, the additional 44 percent will raise the total tariff to 56.5 percent, making Sri Lankan rubber exports highly uncompetitive in the US market. “This is expected to have a far-reaching impact on the rubber tappers, their families and Sri Lanka’s broader economy,” the CRTA said. The natural rubber sector in Sri Lanka supports over 150,000 rubber tappers/harvesters, most of whom work in rural areas. The association pointed out that these workers, along with their families, depend on the industry for their livelihoods. Moreover, the rubber industry encompasses a diverse range of businesses, from small-scale plantations to large-scale exporters, all playing a vital role in the sector’s growth and sustainability. The 56.5 percent tariff imposed by the United States has made Sri Lankan rubber exports increasingly uncompetitive, threatening to reduce demand for Sri Lankan rubber in this key market. In 2023 and 2024, Sri Lanka’s natural rubber exports to the United States were valued at US $ 1.2 million. In comparison, exports in 2022 amounted to US $ 1.9 million, highlighting a notable contribution to the country’s foreign exchange earnings. However, the implementation of this tariff is expected to further erode the competitiveness of Sri Lankan rubber in the US market, leading to a continued decline in export revenue. “The consequences of this tariff extend beyond just the rubber sector. The rubber tappers, who form the backbone of the industry, face the prospect of losing their jobs as companies struggle to compete. Many tappers live in rural communities where alternative employment opportunities are limited and their families depend on the income generated from rubber tapping. A downturn in the industry could lead to an economic crisis in these areas, where the rubber trade has been a reliable source of income for decades,” the CRTA said. The CRTA said it firmly believes that with prompt action from the government and effective collaboration between the private and public sectors, Sri Lanka can mitigate the impact of this tariff. “We are at a critical juncture and immediate action is essential. By collaborating with the government, the CRTA is committed to finding sustainable solutions that will protect the interests of the rubber industry, safeguard jobs and maintain the vital foreign exchange earnings that this sector contributes to our economy,” said CRTA Chairman Harin de Silva.

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Colombo, April 4 (Daily Mirro) - The Government of Sri Lanka today reaffirmed its strong commitment to deepening economic relations with the United States, as concerns mount over a newly proposed 44% reciprocal trade tariff that could impact Sri Lanka’s $3 billion annual exports to the U.S. In an official statement, the Government acknowledged the U.S. administration’s efforts to address trade imbalances and recognized the changing global trade landscape. While expressing concern over the potential impact of the tariffs on Sri Lanka’s export-driven recovery, the Government voiced readiness to engage in constructive dialogue with U.S. officials to manage trade relations in a mutually beneficial and fair manner. “Sri Lanka remains committed to reducing both tariff and non-tariff barriers that hinder trade and investment,” the statement read. “We aim to foster an environment that promotes innovation, encourages commercial partnerships, and unlocks opportunities for both nations.” The Government also highlighted the broader context of Sri Lanka’s economic recovery efforts. Since entering the IMF Extended Fund Facility (EFF) in March 2023, the country has made substantial progress, completing the third review of the programme and stabilizing its economy. Growth is projected at 5% for 2024. Officials thanked the U.S. for its ongoing support, particularly in external debt restructuring. “The U.S. has been a longstanding friend and a trusted trading partner. Its support has been instrumental in our recovery,” the Government said. With global demand showing signs of a slowdown, Sri Lanka expressed concern that further trade restrictions could stall its economic rebound. Furthermore, the Government stressed the importance of engaging early with the U.S. to mitigate risks and ensure that bilateral trade remains a driver of growth and prosperity.

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Sri Lanka’s apparel sector, the country’s largest export industry, is bracing for a major setback after the United States announced steep tariff hikes on imports, a move, which according to the industry, could erode competitiveness. The local apparel industry yesterday raised alarm over the potential fallout from the United States’ new Reciprocal Tariff policy, warning it could significantly disrupt the sector and put thousands of jobs at risk. US President Donald Trump announced a 10 percent baseline tariff on all imports that will take effect from April 5, increasing to a 44 percent ‘reciprocal’ tariff on Sri Lankan exports, starting April 9. “This tariff level is extremely high relative to our regional competitors,” said Yohan Lawrence, Secretary General of the Joint Apparel Association Forum (JAAF). “Sri Lanka could very quickly see its share of US business move to countries with lower tariffs than Sri Lanka has”. The United States is Sri Lanka’s largest single-country apparel market, accounting for over 40 percent of the sector’s total exports, which exceeded US$ 5.5 billion in 2023. “With tariffs coming into effect almost immediately, the impact will be swift and severe. Potentially, we could see the bulk of our U.S. business migrate to competitor markets,” Lawrence added. “This volume of business simply cannot be replaced through other markets.” The government of Sri Lanka has already initiated consultations with the industry and other stakeholders to determine an appropriate course of action. “We are very appreciative of the immediate actions taken by the government to discuss this situation, and we are working very closely with the authorities to see how best we could address the concerns raised by the US Government, whilst staying within the limitations of Sri Lanka’s ongoing IMF programme,” said Lawrence. Despite this challenge, the apparel sector remains committed to transparency, ethical production, and sustainable value creation. “Our focus now is on engagement, agility, and ensuring Sri Lanka remains a trusted sourcing destination,” Lawrence said. “However, this situation is serious, and it must be addressed as a matter of national urgency.”

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The United States has imposed a 44 percent reciprocal tariff on Sri Lankan exports, sending policymakers into panic mode as they scramble to assess the impact and seek relief for the trade-dependent nation. As reported by Mirror Business yesterday, U.S. President Donald Trump announced a wave of tariffs, dubbed ‘reciprocal tariffs’, on all imports in two phases. The plan imposes higher levies on trade partners deemed “bad actors” with persistent trade surpluses with the U.S., while setting a 10 percent baseline tariff on all others. The sweeping new tariffs, which were not a surprise, reverberated through global markets, sending global stocks lower and the U.S. dollar tumbling to its lowest levels for the year. Sri Lanka’s All Share Price Index, which staged a rebound in the two previous sessions and was expected to rally, dropped 349.84 points, or 2.19 percent, to settle at 15,657.60. This pulled the index down from the 16,000 level it had climbed to a day earlier after 15 days. In President Trump’s books, Sri Lanka is a “bad actor”. Sri Lanka exports roughly US$ 3.0 billion worth of goods to the U.S. but imports only about US$ 500 million worth of goods. The reciprocal tariff is half of the 88 percent Sri Lanka has been taxing American imports, which also includes stringent import controls that have been in force at Sri Lankan borders against U.S. goods. Hence, from the U.S. perspective, the reciprocal tariff is more than a fair tax on Sri Lanka. The tariff is set to take effect on 9 April, while the 10 percent baseline tariff will be implemented from 5 April onwards. The biggest casualty is expected to be Sri Lanka’s textiles and apparel sector, as 60 percent to 70 percent of total exports to the U.S. consist of apparel. Based on 2024 data, Sri Lanka’s total merchandise exports amounted to US$12.77 billion, with roughly 23 percent coming from exports to the U.S. This reflects Sri Lanka’s notable reliance on the U.S. as a trading partner, particularly for its textiles and garments, which account for approximately 60 percent to 70 percent of exports. Other exports to the U.S. include rubber products, chemical products such as activated carbon, as well as tea, coconut, and precious stones, which make up the remaining share. While reciprocal tariffs apply universally, some analysts argue that the 44 percent rate puts Sri Lanka at a relative disadvantage compared to countries such as India and Bangladesh, which have been tariffed at 26 percent and 37 percent, respectively. The reciprocal tariff was roughly calculated to be half of what these countries charge the U.S. President Anura Dissanayake appointed a 10-member committee yesterday, consisting of the Central Bank Governor, the Chairman of the Sri Lanka Export Development Board, and the Chairman of the Board of Investment, to make recommendations regarding the new trade conditions following the imposition of reciprocal tariffs. Meanwhile, Deputy Economic Development Minister Professor Anil Jayantha said the government expects to explore the possibility of securing some relief before April 9 through discussions.

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Referring to the United States’ recent decision to impose reciprocal tariffs on Sri Lankan goods, Minister of Industry and Entrepreneurship Development Sunil Handunneththi voiced strong concern, describing the move as both unexpected and damaging to the country’s economic ambitions. Speaking to media, he said “This is actually a big shock and something that we expected As such, he warned that the new tariffs could derail the government’s target of increasing exports by $3 billion. Handunneththi also criticized the methodology used to determine the tariff rate, calling the 44 percent figure “unfair.” He claimed the calculation—based on halving the trade deficit between the two countries—places an undue burden on Sri Lanka. “The US has no political reason to do this to us,” he said, expressing frustration over the timing of the move. “We were just starting to stabilize. It will be difficult to bear at this time for Sri Lanka.” Further,  the Minister referenced the trade policies of former U.S. President Donald Trump, arguing that such strategies may not be viable in the long run. “President Trump’s plan may not be feasible in the long run, considering the consumption patterns of the country,” he said.

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Sri Lanka’s export industry is facing a significant challenge following the United States’ decision to impose a 44% reciprocal tariff on Sri Lankan products. The tariff imposed by the U.S. presents a formidable challenge to Sri Lanka’s exports to the U.S, particularly the apparel industry. Tea, and Other Exports Also at Risk. Tea exports could decline if higher tariffs make Sri Lankan tea less competitive against suppliers like India, Kenya, and China. Other products, including spices, seafood, and coconut-based goods, will face similar cost pressures, making it harder for Sri Lankan exporters to maintain their market share in the USA. With the U.S. being a major destination for apparel and other key exports such as tea, spices, seafood, and coconut-based goods, we will face similar cost pressures, making it harder for Sri Lankan exporters to maintain our market share. This move raises concerns about competitiveness, trade sustainability, and economic stability. How will this tariff affect Sri Lanka’s exports, especially the apparel sector, and what can the country do to mitigate the impact? The Impact on Sri Lanka’s Apparel and Export Sector Is a hit to Apparel Exports – Sri Lanka’s Largest Foreign Exchange Earner warns Ambassador Kana Kananathan, the former High Commissioner to Kenya. The textile and apparel industry accounts for nearly 40% of Sri Lanka’s total exports, amounting 3.3 billion dollars p.a. from the U.S,. being one of the biggest buyers with apparel constituting a significant portion of this trade.   A 44% tariff will make Sri Lankan apparel significantly more expensive compared to competitors like Bangladesh, Vietnam, Cambodia and India. Reduced demand from U.S. buyers could lead to declining orders, etc. While immediate government intervention is essential, businesses must also adapt by innovating, shifting to new markets, and strengthening supply chains. The challenge is significant, but with the right strategies, Sri Lanka can emerge more resilient in the global trade arena. Kananathan further said that the exporters should also think of the 1/3 Cost-Sharing Model. Exporters (Sri Lankan manufacturers) accept a partial reduction in profit margins, ensuring they remain competitive without pricing themselves out of the market. Buyers (Retailers & Brands in the U.S.) agree to absorb part of the tariff cost, recognizing the long-term value of a stable and reliable Sri Lankan supply chain. Suppliers (Fabric & Raw Material Providers) offer price flexibility, such as discounts or extended credit terms, helping to offset cost increases.

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In the wake of the US reciprocal tariffs, former President Ranil Wickremesinghe stressed the importance of the conclusion of the Economic and Technology Cooperation Agreement (ETCA) with India while operationalising free trade agreements with Thailand and Singapore. In a video footage, he said that the U.S. would not be open for a free market under the circumstances. He stressed that his government planned for the signing of the FTA this year. He also said that the export products basket should be diversified without depending on apparel products alone.

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By Dr. Kenneth De Zilva The United States yesterday announced and introduced a significant shift in its trade policy by imposing tariffs on imports, marking a departure from the globalization and comparative advantage doctrine that has dominated international trade for decades. This move aims to revert to a more national (i.e. MAGA, or Make America Great Again) and protectionist model, reminiscent of Alexander Hamilton's economic strategy, which emphasizes domestic manufacturing and economic self-sufficiency. It is safe to say that President Donald Trump has been influenced by Hamilton's ideas, particularly in his dealings with all its trading partners (including developing countries), where he has sought to reduce the U.S. trade deficit through tariffs and other trade restrictions. Reversing Globalization and Twin Deficits This neo-Hamiltonian pivot reflects a consensus that neoliberal globalization failed to constrain China's state-driven model. Globalization has led to the outsourcing of manufacturing and substantial trade deficits for the U.S. The new policy seeks to reverse this trend by extracting surpluses from major trading partners like the EU and Asia. President Trump's approach introduces a new economic focus, prioritizing a balanced trade ledger and domestic economic growth. This strategy is designed to address the failures of globalization in reducing economic disparities and promoting equitable growth. Economists Critique of Globalization Economists like Joseph Stiglitz have long argued that globalization has exacerbated income inequality and failed to address poverty effectively. In his book "Globalization and Its Discontents," Stiglitz critiques the role of multilateral agencies such as the IMF and World Bank in perpetuating these issues. Jeffrey Sachs too has also highlighted the flaws in the multilateral agenda, emphasizing the need for more equitable and sustainable economic policies. Impact on Sri Lanka Sri Lanka is heavily reliant on exports to the U.S., with approximately 23% of its total exports destined for the American market, of which 55% is apparel sector related exports. In 2024, Sri Lanka's exports to the U.S. included significant contributions from multiple sectors, namely, from the apparel, rubber, coconut, tea, gems, and fish sectors. Risk Assessment for Sri Lanka The imposition of a 44% tariff on Sri Lankan goods by the U.S. poses significant risks to Sri Lanka's economy, particularly its apparel industry. Here is a risk assessment table highlighting the potential impacts of the U.S. tariffs on Sri Lanka's exports: Explanation of Risk Ratings: High: The apparel sector is highly vulnerable due to its significant contribution to Sri Lanka's exports to the U.S. and the potential for sharp declines in orders due to increased costs, will have significant impact on an industry that accounts for 710,000 direct and indirect jobs. Medium: Rubber products face moderate risk as they are less sensitive to price changes compared to apparel but still contribute substantially to exports while employing 400,000 both direct and indirect. Low: More diversified portfolio of Tea, precious stones, and fish & seafood are less affected due to their smaller share in total exports to the U.S. and potentially less price-sensitive markets. Final Thoughts The U.S.'s new tariff policy reflects a broader shift away from globalization and towards economic nationalism and national balance sheet economic model approach. While this presents challenges for the global economy and countries like Sri Lanka, it also offers opportunities for strategic diversification and seeking new growth partners (BRICS plus is one such block), as the trade landscape has been leveled out. The high tariffs imposed on Sri Lanka's merchandise exports, particularly in the apparel sector, pose significant risks to the country's economy and employment. However, by diversifying its export markets and adapting to changing trade and Asian consumer dynamics, Sri Lanka can mitigate these risks and explore new avenues for economic development. Dr. Kenneth De Zilva is a Business Cycle Economist