Sri Lanka's Apparel Industry Faces Tariff Pressure Despite Steady Orders

Strategic Insights -

The Sri Lankan apparel industry continues to see a steady flow of orders despite the imposition of tariffs on imports from the US. The industry is under pressure from buyers to reduce prices, as the US retail market faces the strain of tariffs. The country's export figures to the US have dropped by 18.46% in the January-October period, with the US accounting for 40.04% of Sri Lanka's apparel exports in 2024.

Key Takeaways:

  • The US has imposed a 20% tariff on Sri Lanka's apparel exports, increasing the total duty owed due to "stacking tariffs" – the cumulative application of multiple tariffs on a single imported product.
  • Buyers are requesting lower prices and are seeking to share the tariffs with suppliers to sustain demand.
  • The industry has not seen a drop in orders, with shipments being made to the US for the spring and summer, and orders being obtained for the Fall.
  • If the current tariff structure persists, there may be a gradual shift towards countries with no Most Favoured Nation (MFN) status, such as South America, Jordan, and Egypt.
  • Countries like Vietnam are pushing for the US to move out of tariff stacking by early next year, potentially leading to changes in the tariff structure.
  • The industry is seeking to negotiate cheaper rates with fabric suppliers to offset the increased tariffs.

Statistics:

  • Export figures to the US have dropped by 18.46% in the January-October period to $1,300 million compared to the same period last year.
  • The US accounts for 40.04% of Sri Lanka's apparel exports in 2024.
  • The imposition of tariffs has led to a 5-10% drop in prices in the retail market.
  • Most Favoured Nation (MFN) countries, including Sri Lanka, face tariffs ranging from scratch to 20%.

Sources:

  • Kumar, T. V. (2024). US imposes 20% tariff on Sri Lanka's apparel exports. Apparel Industry in Sri Lanka.
  • Sri Lanka Customs (2024). Export Statistics.
  • [No date available]. Countries to push for US to move out of tariff stacking.