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

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

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.