Category: Featured Headlines

Sri Lanka, which has been having ongoing discussions with the US over worrisome, rising import tariffs, is heading for a tough round of negotiations with the US next week after a proposed new 12.5 per cent tariff increase on exports was announced earlier this week. The US is Sri Lanka’s biggest buyer of garments.

The US said a public hearing will be held in this regard on July 7. Ahead of this public hearing, Sri Lanka is next week sending a high-level delegation inclusive of Treasury officials for another round of negotiations with the US authorities.

This week, the US brought 60 countries under the scanner for buying goods manufactured by countries that use forced labour. These concerns were raised by the US in its latest statement on trade with these countries that it says could be slapped a 12.5 per cent tariff on future exports if they don’t prohibit these goods into their countries.

Industry analysts point out that this will be a tough round of negotiations and the outcome of these bilateral discussions will decide whether Sri Lanka will be imposed an additional 12.5 per cent tariff or not.

It was noted that there is a possibility of these negotiations ensuring that Sri Lanka could make a fair deal that could be favourable to the US as well in order that such tariffs are not imposed.

The Ceylon Chamber of Commerce in a statement on Thursday in this respect highlighted that such a tariff if it were to be imposed on Sri Lanka would entail an uneven playing field in trading with the US. This 12.5 per cent is not applicable to all nations trading with the US.

In light of this new arrangement by the US, countries are once again scrambling to carry out negotiations with the US in order to ensure that they are able to cut a good deal.

The negotiations with the US mainly want to ensure that Sri Lanka purchases more goods from the US in a bid to improve the trade deficit between the two countries.

One of the key concerns is that Sri Lanka purchases cotton from the US, which is more expensive compared to the purchases made from other countries. However, it was pointed out that these were being worked out in line with the US buyers’ request if this will be given concessions on landing in the US. US President Donald Trump first imposed tariffs of 25 per cent on imports from Canada and Mexico on March 3, 2025 and then on April 2, 2025 announced “Liberation Day” tariffs with a baseline 10 per cent tariff on nearly every country with some countries given higher rates.

Sri Lanka was initially imposed tariffs of 44 per cent that was reduced to 30 per cent and then brought down to 20 per cent. This kind of reciprocal tariff regime on countries was invalidated by the US Supreme Court on February 20, 2026. Thereafter the US imposed a 10 per cent global tariff under Section 122 of the US Trade Act of 1974 that is due to expire on July 24, 2026.

It is against this backdrop that the US has now proposed a 12.5 per cent tariff.

The United States has proposed imposing additional duties of 12.5 per cent on imports from Sri Lanka, after the country was found to have failed to enforce a prohibition on goods made with forced labour, in the latest escalation of Washington’s sweeping trade offensive against dozens of economies worldwide.

The proposal, announced by the Office of the United States Trade Representative (USTR), places Sri Lanka among 45 countries facing the steeper 12.5 per cent levy under a Section 301 unfair trade practices investigation, a legal mechanism that allows Washington to act unilaterally against trading partners deemed to be engaging in practices that burden American commerce.

What the USTR found

According to the trade agency, Sri Lanka has failed to impose and effectively enforce a forced labour import prohibition.

The USTR concluded that this failure constitutes an unreasonable act or policy that restricts United States commerce, triggering the proposed punitive tariff.

US Trade Representative Jamieson Greer said in a statement that the failure of trading partners to address imports of goods made with forced labour was “unacceptable,” adding that it placed American workers at a competitive disadvantage in global markets.

60 countries targeted

The proposal covers 60 economies in total.

Fifteen countries, including Canada, Britain, the European Union, Mexico, Bangladesh, Pakistan, Malaysia and Cambodia, face a lower additional duty of 10 per cent, while the remaining 45, including Sri Lanka, face the higher 12.5 per cent rate.

The announcement is the latest move by the Trump administration to rebuild its tariff framework following a significant legal setback.

In February, the US Supreme Court struck down emergency tariffs imposed under the International Emergency Economic Powers Act.

A temporary 10 per cent levy, introduced on the same day as the court ruling, is due to expire on 24th July.

Textiles in the frame

Of particular concern for Sri Lanka will be the USTR’s proposal of a textile mechanism that would allow a certain volume of apparel and textile imports to enter the United States at a reduced tariff rate.

Sri Lanka’s garment and textile sector is one of the country’s most important export industries and a significant source of foreign exchange earnings, making any shift in US trade policy deeply consequential for the economy.

Details of the reduced rates and allowable volumes under this mechanism have not yet been disclosed.

What happens next

The USTR has opened a public comment period on the proposed tariffs, with submissions accepted until 6th July and a public hearing scheduled for 07 July.

Final decisions on the duties are expected to follow.

The trade agency is also expected to release findings from another major Section 301 investigation into excess industrial capacity across 16 trading partners, including China, in the coming weeks.

Former president Gotabaya Rajapaksa has been banned from leaving Sri Lanka by a Colombo court in connection with investigations into the 2019 Easter Sunday terror attacks.

The travel ban was imposed by Fort Magistrate Pasan Amarasena when the case was taken up on Wednesday (03).

Two military officers have also been placed under the same ban, pending further proceedings.

Sally named as suspect

The court also named Major General Suresh Sallay (Retd), former director of the State Intelligence Service (SIS), as a suspect in the investigation.

Sallay’s alleged role in the lead-up to the attacks, and questions over whether intelligence warnings were ignored or suppressed, have long been a subject of public scrutiny and prior parliamentary inquiry.

The Easter Sunday bombings targeted three churches and three luxury hotels in a series of coordinated suicide attacks carried out by local Islamist extremists.

The attacks remain the deadliest act of terrorism in Sri Lanka’s post-war history.

Despite years of investigations, court proceedings, and a presidential commission of inquiry, no senior official has yet been held criminally accountable.

The families of victims have repeatedly expressed frustration over the slow pace of justice.

The Sri Lankan rupee has weakened further against the US dollar today (04), with several commercial banks quoting the US dollar selling rate between Rs. 339.50 and Rs. 340.50.

The Governors Forum, which cited certain issues that had arisen as a result of the postponement of the provincial council election yesterday, urged the government to hold the polls under the old proportional representation system.

A statement issued by the governors’ forum said the provincial council administration had become a single-party affair as ruling NPP MPs have begun interfering with the affairs of provincial councils.

Also, the statement said the entire government machinery is becoming one that is centred on a single person.

“The situation is such that Janatha Vimukthi Peramuna (JVP) General Secretary is saying the provincial council election will not be held this year. A general secretary of a party cannot decide when the provincial council election can be held. The Supreme Court held that a provincial council election could be postponed by a referendum. This verdict was given when Chandrika Kumaratunga administration postponed the provincial council election in 1999,” the statement added.

“We urge the government to hold the provincial council election under the old proportional representation system without taking cover behind the select committee which has been appointed to look into provincial council polls,” it also said.

The statement has been signed by former governors Senthil Thondaman, M. L. A. M. Hizbullah, Shan Wijeya Lal de Silva, Tikiri Kobbekaduwa, Suren Ragawan, Lalith U. Gamage, Maithri Gunaratne, Sarath Ekanayake, Peshala Jayaratne, Anura Vidamagamage, Lakshman Yapa Abeywardena and Rajith Keerthi Thennekoon.