US reciprocal tariffs on Sri Lankan goods forecast to ease by mid-2026

A new forecast from Bloomberg Economics suggests that the reciprocal tariffs imposed by the US on Sri Lankan exports are expected to gradually decrease, reverting to 10 percent by June 2026.

This projection comes as a glimmer of hope amidst concerns over the immediate impact of a significant tariff hike on the nation’s trade.

According to the report, the current 10 percent tariff rate is set to rise to 30 percent, starting August 1, 2025. This revised 30 percent rate is expected to remain in effect through the end of the year. The Sri Lankan government is actively in negotiations with the Trump administration to lower this rate further.

The forecast from Bloomberg Economics, which underpins its overall economic outlook for Sri Lanka, assumes this 30 percent tariff will be in place from August to December 2025, before beginning a gradual reduction back to the 10 percent level by the second quarter of 2026.

The tariff issue remains a significant risk to the Sri Lankan economy’s recovery. The report’s global trade model estimates that a sustained 30 percent reciprocal tariff could slash exports to the US by approximately 36 percent and puts 0.6 percent of the nation’s GDP at risk over the next three years. The country’s textile industry is particularly vulnerable.

While the projected easing of tariffs by 2026 offers a positive long-term outlook, the immediate challenge of the 30 percent rate hike looms large for Sri Lankan exporters. The report notes that a lower-than-expected tariff rate after August 1 could lead to economic growth surpassing the current forecasts. 

Conversely, if the tariffs remain at the 30 percent level beyond 2025, it could lead to a substantial loss in exports, a rise in unemployment and broader negative effects on the economy. (NF)