New US tariff could erode Sri Lanka’s export competitiveness: CCC warns

Says at a time when Sri Lanka is working to accelerate export growth, attract investment, and create employment opportunities, any increase in trade barriers presents a significant challenge

Cautions uncertainty surrounding market access could weigh on investor confidence and complicate efforts to expand exports at a time when global trade conditions remain challenging

Requests the relevant authorities to engage proactively and at the highest levels with the United States to better understand the basis for the tariff and to present Sri Lanka’s case

Sri Lanka’s largest private sector representation, the Ceylon Chamber of Commerce (CCC) yesterday urged the government to engage at the highest levels with the United States after Washington proposed a new 12.5 percent labour-related tariff on Sri Lankan exports. It warned that the move by the US could undermine the competitiveness of key export sectors and pose a fresh challenge to the country’s export-led recovery.

Sri Lanka was continuing discussions with the United States following the suspension of previously announced reciprocal tariffs and seeking to secure a more favourable trading arrangement. The Chamber noted that the additional levy would place Sri Lankan exporters at a disadvantage compared with competing countries facing a lower tariff rate of 10 percent. “The imposition of an additional tariff on Sri Lankan exports risks undermining the competitiveness of key export sectors compared to other countries, which are at a lower rate of 10%,” the Chamber said.

“At a time when Sri Lanka is working to accelerate export growth, attract investment, and create employment opportunities, any increase in trade barriers presents a significant challenge.”

Sri Lanka’s export sector is already showing signs of strain. Key merchandise exports are under pressure, with apparel exports declining by 7 percent and tea exports falling by 6 percent during the first four months of 2026.

The United States remains Sri Lanka’s largest single export market, particularly for apparel, making any deterioration in market access a significant concern for exporters.

Sri Lanka is increasingly relying on exports to support economic growth, strengthen foreign exchange earnings and sustain employment as the country continues its recovery under the IMF-supported reform programme.

The Chamber said Sri Lanka had built a strong reputation as a responsible sourcing destination, with many industries adhering to high labour, environmental and governance standards. It noted that the country had also made substantial progress in strengthening regulatory frameworks and promoting ethical business practices.

Against this backdrop, the Chamber called on authorities to seek urgent clarification from Washington on the basis for the proposed tariff and present Sri Lanka’s case.

“The Ceylon Chamber therefore requests the relevant authorities to engage proactively and at the highest levels with the United States to better understand the basis for the tariff and to present Sri Lanka’s case.”
The Chamber asserted every effort should be made to secure a reduction in the proposed tariff and ultimately seek its complete removal. It stressed the importance of returning Sri Lanka to the lower tariff band while continuing discussions aimed at achieving a more competitive and predictable trading environment.

The business chamber further warned that uncertainty surrounding market access could weigh on investor confidence and complicate efforts to expand exports at a time when global trade conditions remain challenging.

“Given the importance of the US market to Sri Lankan exports, timely engagement and clear communication on the way forward will be critical in providing confidence to exporters and investors,” the Chamber said.

It added that it stood ready to support the government’s efforts and work collaboratively with all stakeholders to safeguard Sri Lanka’s export competitiveness and long-term economic interests.

The latest development adds a new layer of uncertainty for Sri Lankan exporters already navigating weaker demand in some key markets, higher operating costs and intensifying competition from regional manufacturing hubs. With exports remaining a key pillar of Sri Lanka’s external sector recovery, the outcome of negotiations with the United States could have important implications for trade performance, investment decisions and employment growth in the months ahead.