FTZMA proposes potential pathways for SL to tackle Trump’s tariff tsunami

As Sri Lanka grapples with the prospect of new US tariffs on its exports, the Free Trade Zones Manufacturers Association (FTZMA) has unveiled a comprehensive strategy comprising eight potential pathways to address this time-sensitive economic threat.

In response to this looming challenge, the association announced in a media statement that it convened an emergency meeting and is actively collaborating with the government authorities to develop and implement mitigation strategies. These efforts aim to protect the interests of its members and lessen the anticipated negative consequences. 

The FTZMA emphasised that the collective actions taken in the immediate future would be pivotal in determining Sri Lanka’s economic resilience against these protectionist headwinds.

“The choices made today will determine whether Sri Lanka sinks under the weight of protectionist policies or rises above the economic headwinds,” the FTZMA stressed.

The FTZMA’s multi-pronged approach begins with a call for diplomatic engagement, urging the government to negotiate a mutual reduction in tariffs with the US, while emphasising Sri Lanka’s ongoing economic recovery efforts. Simultaneously, the association proposes seeking a more robust long-term solution through a comprehensive free trade agreement with the US, aiming to eliminate or significantly lower tariffs and foster greater trade and investment ties.

To further strengthen the trade relationship, the FTZMA suggests increasing imports of raw materials and other goods from the US, demonstrating a commitment to balanced trade.

Recognising the need to diversify beyond the US market, the strategy also emphasises expanding exports to other regions such as Europe and Asia.

Internally, the FTZMA stresses the importance of investing in local industries and adopting new technologies and sustainable practices to enhance the global competitiveness of Sri Lankan products. Additionally, the association calls for actively pursuing special trade benefits from the US to lessen the impact of the tariffs.

A key component of the proposed strategy is fostering strong collaboration between the businesses and government, enabling joint efforts in lobbying and resource sharing to promote trade. Finally, the FTZMA recommends offering incentives to attract American companies to invest and establish operations within Sri Lanka.

These strategic recommendations come as the potential repercussions of the US tariffs become increasingly apparent. Sri Lanka’s vital apparel industry, a major foreign exchange earner accounting for around 56 percent of industrial exports to the US, is particularly vulnerable. The tariffs threaten its competitive edge in the American market, potentially leading to decreased orders and job losses. The tea industry, responsible for approximately 9 percent of exports to the US and glove exports (about 5 percent), the third-largest export commodity, also face significant challenges. Beyond these key sectors, other important exports such as tyres, coconut products, cinnamon and gems and jewellery are also at risk of losing their market share in the US.

The association has cautioned that these tariffs could severely harm Sri Lanka’s trade balance, potentially triggering a wider economic downturn characterised by reduced production and foreign investment.

The FTZMA, representing over 300 enterprises across Sri Lanka’s free trade zones, has raised the alarm about the devastating impact these potential tariffs could have on the nation’s economy. The FTZMA members, including the key players in the apparel, tea and rubber industries, are bracing for the ripple effects of reduced competitiveness in the US market. Fears of mass layoffs and factory closures loom large over thousands, who rely on these sectors for their livelihoods.