The timing of the U.S. tariff announcement could not be worse for Sri Lanka. Just as the country was stabilising after its worst economic crisis in recent history and aiming to grow exports in 2025, the garment industry, a pillar of its recovery has been shaken by this external shock.
What’s worse, Sri Lanka appears to have been caught in a geopolitical crossfire between Washington’s protectionism and Asia’s growing economic influence. In recent years, Sri Lanka has deepened economic ties with China, particularly through the Belt and Road Initiative and infrastructure investment projects such as the Colombo Port City. While these moves are part of the country’s strategy to attract capital, the optics have raised eyebrows in Washington. Under Trump’s “America First 2.0” doctrine, countries seen as drifting into China’s orbit may find themselves under greater scrutiny or pressure in trade negotiations. Thus, the question arises: was the 44% tariff simply economic policy or a subtle political signal?
Competing nations stand to gain
While Sri Lanka suffers under the new U.S. tariff regime, regional competitors such as Bangladesh, Vietnam, and even Mexico are poised to benefit. Bangladesh continues to enjoy preferential U.S. trade treatment under the Generalized System of Preferences (GSP), and its LDC status shields many of its exports from harsh duties. Vietnam, meanwhile, has long been a strategic trade partner for the U.S., especially as companies seek alternatives to China for low-cost manufacturing. As part of the USMCA agreement and located within proximity to American markets, it is being courted by U.S. retailers eager to shift production closer to home. Already, major U.S. buyers are reportedly holding back orders from South Asian suppliers in anticipation of new deals in Central America. In this increasingly competitive landscape, Sri Lanka must act swiftly to protect its market share or risk long-term displacement.
Voices from the industry
Speaking to a weekend newspaper, Rohan Masakorala, CEO of the Shippers’ Academy and trade expert said:
“This is a wake-up call. Sri Lanka can no longer rely on traditional trading relationships without diversifying or innovating. The tariff is damaging, yes but it is also a chance to redefine our export identity.”
Similarly, Sharmini Ratwatte, a senior executive at a leading apparel conglomerate, emphasized the impact on operational costs:
“We are already under immense cost pressure due to global inflation, shipping costs, and energy prices. A 44% tariff is not something we can absorb it will get passed to the buyer or lead to lost contracts.”
The reality is clear: unless Sri Lanka adapts quickly, the damage may not be temporary.
What can be done now?
There is no silver bullet solution. But apparel leaders, economists, and policy advocates have outlined several immediate and medium-term actions that can be taken:
Diplomatic reengagement with Washington
The Sri Lankan Government must initiate high-level bilateral discussions with the U.S. Trade Representative’s office. A request for tariff exemptions on ethical and sustainable apparel, a traditional strength of Sri Lanka, could be a possible pathway.
Expanding trade with the EU
Sri Lanka currently benefits from GSP+ status with the European Union, allowing tariff-free access for apparel exports. Strengthening trade volume and building long-term contracts in EU markets can offer a buffer against U.S. market losses.
However, GSP+ comes with its own renewal conditions, including governance and human rights compliance, which must be carefully navigated.
Supporting SMEs and local supply chains
The apparel sector is not limited to large conglomerates. Hundreds of small and medium-sized enterprises (SMEs) across Sri Lanka produce garments for niche export markets. These SMEs, often unable to absorb tariff-related shocks, require targeted financial aid, market intelligence, and digital tools to remain competitive.
Upskilling the workforce
A national effort to reskill workers and promote tech-integrated manufacturing can position Sri Lanka as a leader in smart, ethical apparel production.
Training centres, public-private partnerships, and vocational institutes must step up to prepare the industry for the fourth industrial revolution in garment manufacturing.
Worker welfare in jeopardy
At the grassroots level, the human toll of the tariff is beginning to show. Many factories have placed workers on reduced hours, and others are contemplating layoffs. For thousands of families that rely on a single income from the apparel sector, especially in rural provinces such as Kurunegala, Gampaha, and Moneragala, this situation is rapidly becoming dire. Tharushi, a 26-year-old sewing machine operator in Giri tale, shared her concerns with a weekend newspaper:
“They have cut our overtime. I am worried I will not be able to send money to my parents. We went through Covid-19, and now this.”
Civil society organisations have urged the Government to introduce temporary wage protection schemes or unemployment allowances for affected workers. Some have even called for the establishment of an emergency “Apparel Sustainability Fund” jointly managed by the government and industry leaders.
The global picture: trade wars and realignment
What is happening in Sri Lanka is part of a larger global trend. Protectionism is back. The post-pandemic period has seen a retreat from globalisation, with many Western countries prioritising domestic manufacturing, energy independence, and reshoring of critical industries. Under President Trump, the U.S. is aggressively pursuing policies that reduce reliance on Asian supply chains even if those policies cause disruption in allied nations
Beyond survival, towards transformation
As Sri Lanka’s garment industry stares down a 44% tariff wall, the choices are stark but clear. Will the country cling to legacy models of production and pray for policy relief? Or will it pivot, innovate, and carve out a new competitive edge in a reshaped global economy?
Sri Lanka has always punched above its weight in apparel. Its factories are among the cleanest in the world, its labor practices among the fairest. Now, the same determination that saw the industry through Covid-19 and economic crisis must be harnessed to tackle this newest storm. Whether it is digital transformation, market diversification, or proactive diplomacy, the path forward requires unity, urgency, and bold leadership. If those can be achieved, Sri Lanka’s garment sector will not just survive Trump’s trade tsunami it will emerge stronger on the other side
