Sri Lanka after IEEPA: Navigating tariffs in a volatile US trade environment

The recent US Supreme Court ruling will reduce Sri Lanka's overall tariff from about 31% to 21.6%, with apparel seeing nearly a 10point cut.

- by Dr Asanka Wijesinghe, Research Fellow, Institute of Policy Studies of Sri Lanka

More Sri Lankan products now qualify for tariff exemptions, granting dutyfree access for an additional USD 65 million worth of exports.

The potential for additional tariff reductions via framework agreements with the US is limited since the existing agreements have produced only small tariff reductions.

The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) on 20 February 2026, creating uncertainty about future US tariff policies. The US used IEEPA to impose reciprocal tariffs on trade partners and additional fentanyl-related trade measures for Canada, China, and Mexico since 2025. At the time of the Supreme Court ruling, Sri Lanka's reciprocal tariff rate was 20%. The US administration quickly invoked Section 122 of the Trade Act of 1974 to maintain high tariffs. Section 122 allows a US president to address international payment issues.

Moving forward, Sri Lanka will face three different tariffs: namely, 1) 10% Section 122 tariff, 2) the Section 232 tariff, and 3) the Most Favored Nation (MFN) tariff. Notably, the Section 122 tariffs are only valid for 150 days, and the US has signalled that this rate will rise to 15%. Amid these developments, this article analyses how the US Supreme Court judgement affects tariffs faced by Sri Lanka, and Sri Lanka's relative tariff position visa-vis competitors like Indonesia, Cambodia, and Bangladesh.

How has the tariff changed since “Liberation Day”?