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"Just as we breathe again": Trump's tariff blow to Sri Lanka's fragile recovery

Daily FT

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July 11, 2025

TRUMP'S proposed 30% tariff on Sri Lankan exports, set to take effect on 1 August 2025, threatens to derail the island's early-stage economic recovery. As Sri Lanka navigates a post-crisis macroeconomic transition, this impending tariff shock exposes the country's structural trade vulnerabilities and over dependence on Western markets.

- By Lilanga Wijerathna

"Just as we breathe again": Trump's tariff blow to Sri Lanka's fragile recovery

After years of currency volatility, sovereign default, and foreign reserve depletion, Sri Lanka is finally beginning to see daylight. Inflation is slowing, investor sentiment is cautiously improving, and international confidence in its IMF-led reforms is growing. Yet, just as the country takes its first breath of stability, a protectionist storm brews thousands of miles away with the potential to choke its fragile recovery.

US President Donald Trump has announced a revised tariff regime targeting countries he deems as unfair trade beneficiaries. Sri Lanka, surprisingly, finds itself in the crosshairs with a steep 30% import tariff on its goods entering the US. Alongside Algeria, Iraq, and Libya, Sri Lanka now faces a significant erosion of price competitiveness especially in its largest export sector.

Garments and textiles, which account for nearly 40% of Sri Lanka's total export revenue, are the most immediately vulnerable. The US alone imports over $ 1.5 billion worth of Sri Lankan apparel annually, making it the industry's largest market. Factories in Katunayake, Avissawella, and Biyagama the nerve centres of Sri Lanka's apparel trade operate within thin profit margins and highly price-sensitive global value chains.

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THE Cabinet of Ministers this week approved new contracts for SriLankan Airlines Ltd.'s operations at Frankfurt Airport, Germany, following the scheduled conclusion of existing service agreements.

time to read

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Govt. to re-tender Kollupitiya land for mixed development after cancelled lease

THE Cabinet of Ministers has approved a fresh call for investment proposals to lease a prime block of land in Perahera Mawatha, Colombo 3, following the cancellation of a previous lease agreement due to the investor's failure to meet contractual obligations.

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Govt. revises annual liquor licence, one-time entry fees up to Rs. 25 m

THE Government has moved to restructure excise licensing charges, with the Finance Ministry issuing Excise Notification No. 03/2025 setting out a revised fee regime.

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3 mins

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time to read

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Sri Lanka to launch $ 2.66 m Natural Capital Valuation Project for coastal and marine ecosystems

THE Cabinet of Ministers on Wednesday approved the implementation of a new environmental conservation initiative funded through a $ 2.66 million grant from the Global Environment Facility (GEF), aimed at formally assessing and integrating the natural capital value of Sri Lanka's coastal and marine ecosystems into national development planning.

time to read

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