Donald Trump reduces tariff on Sri Lanka to 20%

The new rate will come into effect from August 7, 2025, with exemptions granted for goods already in transit prior to that date.

Sri Lanka is now aligned with key regional competitors like Vietnam and Bangladesh, which also enjoy a 20% tariff rate, and is ahead of India, which faces a 25% rate. However, Pakistan and Indonesia have secured slightly more favorable terms, with a 19% rate — offering them a potential edge in certain product categories.

The tariff reduction is part of a broader policy adjustment by the U.S., rewarding countries that have made what it terms “meaningful trade and security commitments.” Sri Lanka’s inclusion in this category reflects positive diplomatic and economic engagement with Washington.

However, the executive order also outlines strict anti-transshipment measures, including a 40% duty on goods rerouted to evade tariffs. This poses compliance challenges for Sri Lankan apparel exporters, many of whom rely on shipping through third countries. Authorities have urged exporters to adhere strictly to U.S. customs protocols to avoid penalties and delays.

The announcement is expected to positively impact Sri Lanka’s export sector, particularly garments, rubber products, and tea, helping the island nation maintain its competitiveness in the U.S. market.