By: Staff Writer
June 07, Colombo (LNW): Sri Lanka’s fragile economic recovery faces a fresh challenge following the United States proposal to impose an additional 12.5 percent duty on imports from the island nation over concerns related to forced labour in global supply chains.
The proposed measure, announced by the Office of the United States Trade Representative (USTR) on June 2-3, 2026, places Sri Lanka among 54 countries accused of failing to adequately prohibit or enforce restrictions on imports linked to forced labour. The additional tariff is not yet final, with public consultations scheduled until July and hearings to follow. However, the proposal alone has already raised alarm among exporters and trade analysts.
For Sri Lanka, the implications are potentially severe. The United States remains the country’s single largest export market, accounting for billions of dollars in annual export earnings, particularly in apparel. An additional 12.5 percent tariff would immediately reduce the competitiveness of Sri Lankan products in the American market, forcing buyers to either absorb higher costs or shift sourcing to alternative suppliers.
Industry observers point out that Sri Lanka’s apparel sector, already struggling with rising production costs and weak global demand, can ill afford another setback. Competitor countries that secure lower tariff rates or exemptions could gain market share at Sri Lanka’s expense. The Joint Apparel Association Forum has already warned that the country has been placed in the higher tariff category, creating a significant competitive disadvantage.
Deputy Finance Minister Anil Jayantha insists that discussions are underway with Washington and that Sri Lanka can eventually secure relief by strengthening safeguards against forced labour within supply chains. He also says legislative amendments are being considered.
However questions remain over how quickly such assurances can translate into concrete outcomes. The USTR investigation was formally launched only on March 12, 2026, with findings announced on June 2. If the Sri Lankan Government indeed established a committee “several months ago” specifically to address this issue, critics ask how authorities became aware of a trade action that had not yet been publicly announced. The timeline appears inconsistent and demands clarification.
More importantly, securing relief from Washington may prove difficult. Trade decisions in the United States are increasingly influenced by broader geopolitical considerations. Sri Lanka’s recent foreign policy positions, particularly its engagement with Iran and growing ties with countries viewed cautiously by Washington, may not strengthen Colombo’s negotiating leverage.
While the Government projects confidence that discussions with the USTR will produce a favourable outcome, exporters remain unconvinced. If the tariff is ultimately implemented, the consequences could extend beyond trade statistics. Reduced export earnings would weaken foreign exchange inflows, pressure employment in export industries and complicate Sri Lanka’s broader economic recovery at a time when stability remains far from guaranteed.