Apparel sector must brace for possible U.S. origin-based tariffs - Kananathan

Colombo, August 12 (Daily Mirror) - Sri Lanka’s apparel sector — the country’s largest export earner — may soon face a significant challenge if the United States shifts to an origin-based tariff regime, said former Diplomat Kana Kananathan.

Under such a system, tariffs would be calculated based on where the raw materials are sourced, not merely where the finished product is assembled.

Unlike the current system, where duties are applied based on the country of final assembly, an origin-based framework calculates tariffs on where the raw materials come from. For Sri Lanka, this shift would be a serious blow. 

Our apparel sector relies heavily on imported fabrics, mainly from China and India, that already face steep U.S. tariffs 50% in certain categories. If these origin-based rates were applied to apparel made in Sri Lanka, even garments cut and sewn locally could be subjected to punitive tariff levels.

The potential proposed introduction of a 20% U.S. tariff on Sri Lankan apparel — calculated with origin rules in mind — would erode our competitive advantage in one of our most important markets. Margins in the apparel trade are already tight, and any sharp cost increase could push Sri Lankan suppliers out of lucrative contracts with major American retailers.

Ambassador Kananathan  said that under  an executive order issued by Trump few days ago goods imported into the U.S. face a punitive 40% tariff, plus penalties and any applicable country-of-origin duties, if U.S. Customs and Border Protection determines they have been “transshipped.” This raises a new and serious risk for our exporters, who could face not only origin-based tariffs. 

Kananathan called for Exporters and policymakers must act now to restructure supply chains, build local capacity, and strengthen global competitiveness.

Failure to prepare could turn this policy shift into a crippling blow — but with foresight, collaboration, and innovation, Sri Lanka can turn a looming threat into an opportunity for resilience.

Global trade is shifting rapidly, and reactive strategies will not suffice. To safeguard our apparel industry, the country should move decisively — before trade rules change in ways that leave us disadvantaged.