Going beyond US reciprocal tariffs: SL's exposure to tariffs and exemptions

The United States’ (US) proclamation of ‘reciprocal tariffs’ dealt a blow to the global trade system based on the World Trade Organisation principles. With the individualised tariffrates, the US has discarded non-discrimination in the Most-Favoured-Nation (MEN) tariff structure. The reciprocal tariff rate does not show any reciprocity but rather a calculation hypothesised to drive a bilateral trade deficit to zero.

- BY DR. ASANKA WIJESINGHE

Although the reciprocal tariff grabbed attention, the US trade policy under the second Trump administration is more complex. Section 232 of US Trade Expansion Act of 1962 is being used to target key sectors like steel, aluminium and auto parts. In addition, investigations are ongoing to determine tariffs for copper, critical minerals, pharmaceuticals and lumber.

For Sri Lanka, as calculated using the 2024 data, 95.6 percent of US imports are subject to reciprocal tariffs — with the 90-day pause, standing currently as a 10 percent global tariff. In addition, 4.2 percent of imports from Sri Lanka are subject to the steel and aluminium and auto parts tariffs imposed under Section 232.

However, 0.2 percent of Sri Lanka’s imports are exempted from the new tariff measures. These exemptions were made by issuing Annex-II of the US Executive Order on the reciprocal tariffs and a notice issued by the US Customs and Border Protection (CBP) on April 12.

SL's exposure to Section 232 tariffs: Steel, aluminium and auto components tariffs

In 2018, under the first Trump administration, the US imposed a 25 percent tariff on steel and a 10 percent tariff on aluminium imported from all trade partners under Section 232 tariffs.

On March 12, 2025, the US expanded the 2018 Section 232, increasing the aluminium tariff to 25 percent, removing all existing exemptions and adding more derivative products that use steel and aluminium as components. For example, a keg is an aluminium derivative product. When steel and aluminium imports are expensive, due to tariffs, the domestic producers are no longer competitive in the production of derivatives such as the keg in the earlier example. This leads to lobbying for cascading protectionist tariffs on imported derivatives.