ECONOMYNEXT – Sri Lanka has negotiated to reduce its Trump tariff rates to 30 percent from 44 percent, reducing some of the negative fallouts, but a few direct competitors still have an advantage over the country.
“Compared to new tariffs levied on competing nations, especially those with substantial apparel exports, we believe Sri Lanka is relatively more favorably positioned,” CAL, a Colombo based investment banking group said.
“For instance, China’s effective apparel export tariffs now exceed 55%, comprising 25% pre-existing duties and 30% newly imposed rates.
“Similarly, Bangladesh and Cambodia face higher tariffs of 35 percent and 36 percent respectively. However, Vietnam remains more competitive with a 20 percent tariff (and 40 percent on transshipments), potentially enhancing its appeal as an export hub.”
Sri Lanka’s top exports to the US are apparel and rubber goods. Apparel is considered more footloose and easier to shift as brands already have relationship and capacity in multiple countries.
Bangladesh’s mostly exports to the EU where as a least development country it gets virtually tax free entry.
However, it is not clear whether Sri Lanka would face more competition in Europe if Bangladesh is locked out of the US and whether the island can get some of the American market.
Up to April 2025, Bangladesh apparel exports to the US had risen 29 percent to 2.9 billion US dollars, according to reports.
Our of Sri Lanka’s 4.7 billion US dollars of apparel about 40 percent went to the US in 2024.
Sri Lanka was trying to improve is relative position with competitors in negotiations.
However, countries like Vietnam had negotiated on an absolute basis, freeing trade to the US to gain a long term strategic edge based on comments made by President Trump about allowing duty free US impots to Vietnam.
According to Trump’s letter Sri Lanka could still have a chance in the future to open the country more to US goods and reduce the tariffs.
New link to letter after name correction
(Colombo/July10/2025)