Faced with the imposition of a sharp 44% reciprocal tariff by the US, Sri Lanka’s single largest export destination, the Government is mounting a multi-pronged diplomatic and policy effort to avert a looming trade crisis.
Sri Lanka Export Development Board (EDB) Chairman Mangala Wijesinghe described the development as a matter of ‘urgent national interest,’ affirming that the Government has moved quickly to secure a 90-day grace period during which the tariff has been temporarily reduced to 10%, offering short-term relief for the country’s export sector.
“The Government views this as a critical moment for both immediate containment and long-term recalibration of Sri Lanka’s trade strategy. The US accounts for around 25% of our total exports. Preserving market access is critical—not just for exporters, but for the broader economic stability of the country,” he told the Daily FT.
Wijesinghe confirmed that a high-level delegation, appointed by President Anura Kumara Disanayake, is set to depart for Washington this week, building on a series of preliminary engagements with US officials. “We have already had virtual meetings and submitted formal appeals. Our goal now is to deepen those discussions and work towards a mutually acceptable long-term framework,” he added.
Noting that the EDB hosted stakeholder consultations that brought together major trade chambers and export associations, he said: “We needed an honest ground-level assessment of the impact.”
He said the apparel sector, Sri Lanka’s largest US export, is clearly the most vulnerable. “We are also seeing early signs of disruption in rubber, tea, spices, gems, and even ornamental fish,” he added.
Wijesinghe acknowledged that the impact of the US tariff could be severe if left unchecked.
“We currently enjoy very low tariffs on many key products. That advantage disappearing overnight would raise prices for US buyers, making our goods less attractive. The knock-on effect on jobs, incomes, and foreign exchange could be significant,” he said.
Industry representatives have expressed alarm over cancelled and delayed orders and proposed a suite of mitigation measures. These include easing production costs, facilitating International Monetary Fund (IMF)-supported relief for exporters, and even re-evaluating the country’s own tariff structure to demonstrate reciprocal goodwill.
“There is consensus that we need to act quickly and in concert. Our export economy has faced shocks before. But we are taking this one head-on with clarity, urgency, and unity,” Wijesinghe added.
Looking beyond the US, he said Sri Lanka is accelerating efforts to diversify trade relationships, especially in Asia. “We are planning to expand market diversification to the Middle East, and Asian, and African countries,” he disclosed.
The EDB Chief opined the recent visit by Indian Prime Minister Narendra Modi was used to advance negotiations on expanding the Indo-Lanka Free Trade Agreement (FTA).
“India is a critical partner and this is an opportunity to update the FTA in a way that better reflects today’s economic realities,” he stated.
According to Wijesinghe, Sri Lanka is also exploring immediate tactical advantages through existing FTAs with Singapore and Thailand.
“These countries’ preferential trade access with the US could provide Sri Lanka hopes to use their existing trade networks to keep our goods flowing, especially if new joint ventures or re-export models are designed efficiently. We are not just thinking about new markets, we are thinking smartly about using regional trade routes and partners to remain competitive,” he explained.
Reiterating that the apparel industry, already under pressure from global demand fluctuations, is at the epicentre of this threat, he said: “Some manufacturers have told us they are already seeing reduced volumes and postponed contracts and once you lose shelf space or supplier status, regaining it is extremely difficult.”
Despite the challenges, Wijesinghe asserted that the Government’s response is coordinated and resolute. “This is not business as usual. We are treating this as a national emergency and we are moving diplomatically, regulatorily, and strategically,” he added.
