Sri Lanka appoints committee to assess impact of new US trade tariff

COLOMBO: Sri Lankan President Anura Kumara Dissanayake on Thursday appointed a high-powered committee to assess the impact of the new US trade tariffs on the nation's economy.

The committee has been tasked with conducting an in-depth study of the implications of these tariffs, particularly on Sri Lankan exports, according to an official release.

US President Donald Trump, in a historic measure to counter higher duties on American products imposed globally, announced reciprocal tariffs on about 60 countries on Wednesday.

Trump imposed a 44 per cent tax on Sri Lanka which he claimed are "discounted" reciprocal of about half the taxes and barriers imposed by the island nation on America, the EconomyNext news portal reported.

Sri Lanka's "reciprocal discounted tax" is half of a deemed 88 per cent in taxes charged on US products, he wrote in a social media post.

Analysts said the new tariffs will directly impact Sri Lanka’s export sector, which sends approximately USD 3 billion worth of goods -- primarily apparel and rubber products -- to the US annually. These goods are now expected to be subjected to a steep 44 per cent tax, significantly raising costs and reducing their competitiveness in the US market.

Economic analyst Dhananath Fernando told PTI that the increased tariffs will surely hit Sri Lankan exports to the US with depleted order volumes.

“They become more expensive, even widening the competition levels for Sri Lankan produce,” he said.

The apparel sector, which accounts for nearly half of Sri Lanka’s exports, employs hundreds of thousands of workers and serves as a key driver of the economy.

Fernando noted that the tariff adjustments present an opportunity for Sri Lanka to reassess its own trade policies.

Sri Lanka is among the countries charged the highest new US tariff. India has been charged 27 per cent, Bangladesh 37 per cent and Pakistan 30 per cent.

Deputy Minister of Finance Anil Jayantha Fernando clarified that the US tariffs were not specifically targeted at Sri Lanka but were part of Washington’s broader review of its reciprocal tax policy.

“What the US has done is to correct the trade imbalance situation with most countries. Currently, the balance is in Sri Lanka’s favour, with USD 3 billion in exports compared to just USD 368 million in imports from the US,” he said.

The deputy minister indicated the government's intention to engage with US officials through diplomatic channels to discuss the potential repercussions of the tariff hikes.

“We hope to discuss the issue with the US using diplomatic channels. We face the prospect of losing export revenue at a time we are going through the IMF-led economic recovery," he said.

The new US tariffs come at a critical juncture for Sri Lanka, which is in the midst of a fragile economic recovery following its worst financial crisis in decades. The nation secured a USD 2.9 billion bailout package from the International Monetary Fund in 2023, contingent on economic reforms, debt restructuring, and fiscal discipline.

The government has faced criticism from opposition figures and business leaders for not preemptively introducing mitigation measures to counter the potential economic fallout of the US trade policy shift.