Kananathan warns of U.S. tariff impact on Sri Lanka’s economy

4 April 2025 05:40 am Views - {{hitsCtrl.values.hits}} 11 Bookmark

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Sri Lanka’s export industry is facing a significant challenge following the United States’ decision to impose a 44% reciprocal tariff on Sri Lankan products. The tariff imposed by the U.S. presents a formidable challenge to Sri Lanka’s exports to the U.S, particularly the apparel industry.

Tea, and Other Exports Also at Risk. Tea exports could decline if higher tariffs make Sri Lankan tea less competitive against suppliers like India, Kenya, and China. Other products, including spices, seafood, and coconut-based goods, will face similar cost pressures, making it harder for Sri Lankan exporters to maintain their market share in the USA.

With the U.S. being a major destination for apparel and other key exports such as tea, spices, seafood, and coconut-based goods, we will face similar cost pressures, making it harder for Sri Lankan exporters to maintain our market share.

This move raises concerns about competitiveness, trade sustainability, and economic stability.

How will this tariff affect Sri Lanka’s exports, especially the apparel sector, and what can the country do to mitigate the impact?

The Impact on Sri Lanka’s Apparel and Export Sector Is a hit to Apparel Exports – Sri Lanka’s Largest Foreign Exchange Earner warns Ambassador Kana Kananathan, the former High Commissioner to Kenya.

The textile and apparel industry accounts for nearly 40% of Sri Lanka’s total exports, amounting 3.3 billion dollars p.a. from the U.S,. being one of the biggest buyers with apparel constituting a significant portion of this trade. A 44% tariff will make Sri Lankan apparel significantly more expensive compared to competitors like Bangladesh, Vietnam, Cambodia and India. Reduced demand from U.S. buyers could lead to declining orders, etc.

While immediate government intervention is essential, businesses must also adapt by innovating, shifting to new markets, and strengthening supply chains. The challenge is significant, but with the right strategies, Sri Lanka can emerge more resilient in the global trade arena.

Kananathan further said that the exporters should also think of the 1/3 Cost-Sharing Model. Exporters (Sri Lankan manufacturers) accept a partial reduction in profit margins, ensuring they remain competitive without pricing themselves out of the market.

Buyers (Retailers & Brands in the U.S.) agree to absorb part of the tariff cost, recognizing the long-term value of a stable and reliable Sri Lankan supply chain.

Suppliers (Fabric & Raw Material Providers) offer price flexibility, such as discounts or extended credit terms, helping to offset cost increases.

Comments - 11

wickrama Wijayasiri Friday, 04 April 2025 09:21 AM

All what is said herein are general unsubstantiated motherhood statements. The source quoted is not an expert on trade, at least on legal trade. These issues must be left to well informed qualified experts and visionaries in the area to plan strategy.

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Mizaru Friday, 04 April 2025 09:25 AM

When i worked in Japan, Japan has a massive trade surplus with the US. The US was not happy. What the US did was to get Japan to appreciate the Yen with respect to the US dollar. That made Japanese good more expensive in the US and US good cheaper in Japan. What the Japanese manufactures (I worked for one) was to reduce the cost and the profit margins and Japanese manufactures survived. What the Kannathan guy have to do is to reduce the cost of production and the profit margins. T

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Malith Friday, 04 April 2025 09:59 AM

As the US tariff increases applicable to almost all garment export countries such as Bangladesh, Kenya, Vietnam, Myanmar etc there is an impact to US consumers as well ! Only thing comparatively countries those who slapped with lower tariff percentages increased will be benefited

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Punchi Friday, 04 April 2025 10:12 AM

This is what happens when instead of keeping the kotiyas within our country boundaries and managing them, we encouraged them to go overseas to deplete their numbers and when overseas they are influencing things like tarrifs against us. Possibly to weaken us financially and bring us down to our knees and become more dependent on India, China etc

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N.Canags Friday, 04 April 2025 01:38 PM

Good example of short sighted negative thinking.

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Neptune Friday, 04 April 2025 01:47 PM

This man Kananathan should see a shrink. He is the one who sent a plane from Kenya to the Pakses joy rides. I am sure one day he will face the music in SL

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Gayan Friday, 04 April 2025 02:18 PM

Kananathan’s proposed 1/3 cost-sharing model offers a pragmatic approach to mitigating the impact of the newly imposed 44% U.S. tariff on Sri Lankan exports, particularly in the apparel sector. By distributing the financial burden among exporters, buyers, and suppliers, this strategy aims to maintain competitive pricing and sustain market share in the U.S.

1 2

Gayan Friday, 04 April 2025 02:18 PM

Kananathan’s proposed 1/3 cost-sharing model offers a pragmatic approach to mitigating the impact of the newly imposed 44% U.S. tariff on Sri Lankan exports, particularly in the apparel sector. By distributing the financial burden among exporters, buyers, and suppliers, this strategy aims to maintain competitive pricing and sustain market share in the U.S.

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Gayan Friday, 04 April 2025 02:18 PM

Kananathan’s proposed 1/3 cost-sharing model offers a pragmatic approach to mitigating the impact of the newly imposed 44% U.S. tariff on Sri Lankan exports, particularly in the apparel sector. By distributing the financial burden among exporters, buyers, and suppliers, this strategy aims to maintain competitive pricing and sustain market share in the U.S.

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Gayan Friday, 04 April 2025 02:18 PM

Kananathan’s proposed 1/3 cost-sharing model offers a pragmatic approach to mitigating the impact of the newly imposed 44% U.S. tariff on Sri Lankan exports, particularly in the apparel sector. By distributing the financial burden among exporters, buyers, and suppliers, this strategy aims to maintain competitive pricing and sustain market share in the U.S.

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Gayan Friday, 04 April 2025 02:19 PM

Kananathan’s proposed 1/3 cost-sharing model offers a pragmatic approach to mitigating the impact of the newly imposed 44% U.S. tariff on Sri Lankan exports, particularly in the apparel sector. By distributing the financial burden among exporters, buyers, and suppliers, this strategy aims to maintain competitive pricing and sustain market share in the U.S.

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