NextFin news, COLOMBO, Sri Lanka — Sri Lanka was subjected to a 20% tariff on exports to the United States effective August 7, 2025, as part of US President Donald Trump's trade measures, according to the Export Development Board (EDB) and industry sources.
On August 29, 2025, a US appeals court ruled that most of Trump's tariffs are illegal but permitted the tariffs to remain in place until October 14 to allow the Trump administration to appeal to the US Supreme Court, Reuters reported. The ruling affects tariffs imposed under the International Emergency Economic Powers Act (IEEPA), which the court found did not authorize such tariffs, stating that tariff-setting is a congressional power.
The tariffs have caused uncertainty in Sri Lanka's apparel industry, a key export sector employing approximately 350,000 workers. Industry officials in Colombo said that while orders for the US winter season are tapering, production is focused on spring orders. Manufacturers and buyers are absorbing the tariff costs without passing them on to consumers, and efforts are underway to optimize supply chains and improve productivity.
Export data from January to July 2025 shows Sri Lanka's exports performing well, with total exports reaching US$9.99 billion, a 7.79% increase compared to the same period in 2024. Apparel and textile exports increased by 8.15% year-on-year in July 2025, reaching US$479.90 million. Exports to the US, Sri Lanka's largest export market accounting for 23% of merchandise exports, rose by 4.29% from January to July 2025 to US$1.71 billion.
Despite the positive export figures, industry officials remain cautious, noting that the full impact of the tariffs will become clearer in the coming months as new tariff structures take effect and US buyers adjust. Trade unions have expressed concern about potential cost-cutting measures that could affect worker incentives.
In addition to US tariffs, Sri Lankan exporters face challenges from the European Union's new Deforestation Rules (EUDR), effective December 30, 2025, which require products exported to the EU to be deforestation-free and legally produced. Natural rubber products, a significant export to the EU, are particularly affected.
Meanwhile, regional competitors such as India and Bangladesh are exploring opportunities to expand exports to the US, leveraging political stability and tariff structures. India faces a 50% tariff on US imports, while Bangladesh negotiated tariff reductions to protect its garment sector.
The Sri Lankan government and export sector stakeholders have engaged in diplomatic efforts to mitigate tariff impacts. The Finance Ministry Secretary and other officials have emphasized the need for industry competitiveness through innovation, efficiency, and diversification of exports beyond traditional sectors like apparel, tea, rubber, and coconut.
The situation remains fluid as the US Supreme Court is expected to review the appeals court decision by mid-October. Sri Lanka's export sector is closely monitoring developments to adapt strategies accordingly.
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