The United States’ decision to impose a steep 50% tariff on most imports from India – covering garments, seafood, jewelry, and carpets has shaken South Asian trade. India, which exports around USD 86 billion annually to the U.S., faces a major setback.
But for Sri Lanka, this disruption presents both a challenge and a rare opening to strengthen its export foothold in the world’s largest consumer market.
Former ambassador to Kenya, Kana Kananathan, told reporters that “Sri Lanka sees both peril and promise” in this new trade reality. With Indian goods suddenly far more expensive, U.S. buyers will inevitably seek alternative suppliers. Sri Lanka’s apparel, seafood, gems, tea, and even IT services could become attractive substitutes, provided the country positions itself strategically.
“American firms are already scouting for new supply chains in the region. If we move quickly, Sri Lanka can capture market share and even attract fresh U.S. investment into export industries,” Kananathan said.
However, the opportunity is not without risk. Sri Lanka’s export industries are still constrained by high production costs, limited capacity, and heavy dependence on imported raw materials. Without immediate reforms and incentives, competitors such as Vietnam and Bangladesh could outpace Sri Lanka in capitalising on India’s tariff-hit.
Adding to the challenge is the political climate at home. The newly elected government has yet to announce any coherent trade or tariff policy. Instead, its early days have been dominated by high-profile corruption investigations targeting former ministers and even a past president.
Analysts warn that while accountability is important, failure to focus on urgent economic policy risks letting this trade opportunity slip away.
Kananathan stressed that Colombo must act with urgency. “This is the right time to roll out targeted incentives tax breaks, concessional loans, simplified export approvals, and dedicated export-ready zones.
At the same time, the government should launch a global promotion drive to position Sri Lanka as the natural alternative to India for U.S. buyers.”
Trade diplomacy will also be critical. Securing stronger ties with Washington, while carefully managing relations with India, Russia, and China, will determine whether Sri Lanka can sustain these gains.
“The door has opened but it won’t stay open forever,” Kananathan warned. “If Sri Lanka mobilises investment and scales up production quickly, this could be a game-changing moment. If not, others will step in, and Sri Lanka will lose yet another opportunity.”
