By: Staff Writer
July 28, Colombo (LNW): Sri Lanka’s plantation sector is bracing for a severe setback as the United States prepares to impose a steep 30% tariff on the country’s tea and rubber exports starting August 1. This development comes as a major blow to two of the island nation’s most historic and labour-intensive industries, which have long relied on preferential access to global markets.
The tariff threatens to undo years of market-building, especially in the US, a vital and growing destination for premium Sri Lankan products. Industry leaders warn the impact could ripple across rural communities and further dampen investor confidence.
The Planters’ Association of Ceylon (PA) has voiced grave concerns, urging immediate government intervention. While regional competitors like Vietnam and India are negotiating favourable trade terms, and Indonesia has already secured a preferential trade agreement, Sri Lanka remains at a disadvantage.
The PA has called for urgent diplomatic engagement with the United States Trade Representative (USTR) to seek relief on key agricultural exports such as Ceylon tea and medical-grade rubber—commodities that carry strong ethical and sustainable credentials in international markets.
To cushion the immediate shock, the PA proposes temporary measures, including duty drawback schemes, export marketing support, and retraining programs for workers affected by the tariff’s impact. It is also urging long-term strategies such as market diversification, branding, and innovation to maintain competitiveness.
Tea Industry Hit at Peak Growth
The tea sector is particularly vulnerable. Ceylon tea, which previously entered the US duty-free, now faces a 30% tariff—eroding its price advantage in a market that imported 6.4 million kg of Sri Lankan tea worth $45 million in 2024, a notable 22% volume growth from 2023. Of this, 65% were value-added products like packaged and flavoured teas, commanding a premium average FOB price of $7/kg, significantly higher than the national average of $5.83/kg.
Despite iced tea dominating 80% of US tea consumption, Sri Lanka has managed to capture 20% of the hot tea segment, driven by increasing demand for high-quality blends. The tariff’s timing is particularly harsh; nearly 300,000 kg worth $3.24 million of tea was already in transit as of April 11, and another 21,000 kg valued at $479,000 was awaiting clearance.
Following the announcement, confirmed orders for 225,970 kg worth $3.14 million were suspended, rattling exporters and impacting cash flow.
Rubber Sector Facing Collapse
The rubber industry, with over $330 million in annual exports to the US—mainly solid tyres, gloves, and PPE—is equally threatened. The new tariff makes Sri Lankan exports instantly uncompetitive, particularly against Vietnam and India. With 80% of Sri Lanka’s solid tyre exports destined for the US, companies have begun halting shipments due to concerns over buyer migration and long-term market loss.
The sector, which supports over 150,000 livelihoods, now risks widespread disruption. The tariff threatens to stall foreign investment, create economic uncertainty in rural areas, and leave rubber farmers with no short-term alternatives, given the crop’s long maturity period.
With no fallback in sight, the plantation sector’s future depends heavily on swift and strategic action by policymakers.
