Beyond Trump Tariffs, Sri Lanka should strive to climb up export ladder

Sri Lanka should strive to climb up export ladder

- By Ranga Jayasuriya

Last week, Sri Lanka secured a major reduction of Trump's import tax on goods, placing it on par with its regional competitors. Sri Lanka's revised tariff rate of 20% would put it on par with Cambodia 19%, Bangladesh 20%, Vietnam 20%, Philippines 19%, Thailand 19% and Pakistan 19%. India, which is still negotiating, is slapped with a 25% plus penalty over energy exports from Russia.

While reduced Trump's import tariffs on goods would not make Sri Lankan exports magically competitive, the steep decrease from an earlier 44% to the current 20% has provided them with a level playing field.

The Trump administration in what it called reciprocal tariff was not particularly gung-ho against the smaller nations with a smaller trade volume in its trade with the US -- its main gripe was with some of its largest trading partners, which maintain a whopping trade surplus -- China US$ 270billion, Mexico US$157 billion, Vietnam US$ 113 billion, Ireland US$ 80 billion etc.

Sri Lanka’s trade surplus in its trade of goods with the US is US$2.6 billion, with Sri Lanka’s imports from the US being a meagre US$366 million in 2024. Despite relatively smaller bilateral trade volume, the US is Sri Lanka's largest export market and buys 20% of its exports. What, however, could have been indefensible in the eyes of the Trump administration is Sri Lanka's prohibitive import taxes, which though not specifically designed against the US imports, smack of as highly stifling of fair trade. An even closer scrutiny might reveal that such prohibitive import taxes have fed into predatory trade practices at our expense. For instance, in 2024, Sri Lanka's trade deficit with China swelled to US$4 billion, more than Sri Lanka's total tourism earnings. Total bilateral trade with China was $ 4.58 billion, and China imported goods from Sri Lanka for just $ 251.9 million, according to Sri Lankan Customs data cited by the Export Development Board.