Sri Lanka’s apparel sector, the nation’s largest export earner, could soon face a major challenge if the United States moves to an origin-based tariff regime, former diplomat Kana Kananathan warned.
In such a system, tariffs would be calculated based on the source of raw materials rather than the location of final assembly. Currently, duties are imposed according to where a product is manufactured. However, since Sri Lanka’s apparel industry relies heavily on imported fabrics — mainly from China and India, which already face steep U.S. tariffs of up to 50% in certain categories — even garments cut and sewn locally could be subject to much higher duties.
Kananathan noted that the potential introduction of a 20% U.S. tariff on Sri Lankan apparel, calculated under origin rules, would erode the country’s competitive edge in a critical export market. Margins in the apparel trade are already tight, and such cost increases could force Sri Lankan suppliers out of valuable contracts with major American retailers.
He also pointed to a recent executive order issued by former U.S. President Donald Trump, under which goods found to be “transshipped” face a punitive 40% tariff, plus penalties and applicable country-of-origin duties. This, he said, adds a further layer of risk for Sri Lankan exporters.
Kananathan urged exporters and policymakers to act immediately to restructure supply chains, build local manufacturing capacity, and enhance global competitiveness. Without preparation, the policy shift could deliver a crippling blow to the industry. With foresight, collaboration, and innovation, however, Sri Lanka could turn this looming threat into an opportunity for resilience.
He stressed that global trade is evolving rapidly, and reactive strategies will not be enough. Sri Lanka must move proactively to protect its apparel industry before changes to trade rules place the country at a disadvantage.
