ECONOMYNEXT – US buyers are awaiting more clarity on the 44 percent Trump tariff before taking any decision to shift out of Sri Lanka, top exporters said, though there is pressure to cut prices after a reduced 10 percent tax went into effect.
Some of the products made in Sri Lanka including are labour intensive and it was not easy to quickly shift them to the US as President Donald Trump wanted to, exporters said.
Rubber products for example were for medical and industrial use. Sri Lanka’s top rubber exports were glove for medical and industrial use and specialist tyres for industry.
“Because our industry is not the products that are nice to have,” Pushpika Janadheera Sri Lanka Association of Manufacturers and Exporters of Rubber Products told a forum organized by the US Sri Lanka Business Council of the Ceylon Chamber of Commerce.
“We do most of the products for industry and the medical related, which are really necessary for their consumption and whatever the price level is going to happen in the U.S.”
Immediately buyers were trying to import more products to beat a May 09 deadline when a 44 percent tariffs are due to kick in.
“Nobody wants to take a harsh decision right now and say, hey, I’m moving to India, I’m moving to Kenya, I’m moving to somewhere else,” Hasitha Premaratne Hasitha Premaratne, Managing Director & Chief Strategy and Transformation Officer, at Brandix said.
“Everybody is saying, we’ve been working with you as partners for a long time. Let’s watch this a little bit more and let it evolve as things progress.
“Nobody wants to take a harsh decision today because they know that by the time they take the decision and the impact comes in, Trump may have made his mind to do something else. So it’s not easy to read his mind and react to it.”
Sri Lanka’s government had already had discussions with the US, and was trying to negotiate it down, which was a positive for buyers to stay for the moment, he said.
In the immediate future, there are no cancellations and buyers were also thinking ahead into the next quarter.
But towards the latter part of 2025, there was uncertainty whether sales volumes would fall in the US amid higher prices and a slowdown.
“So everybody is looking at their inventories and seeing whether they should cut down on the inventories a little bit towards the second half of the, or at least the last quarter of the year, especially the season that is setting in for the Thanksgiving and the Christmas Day with the Black Friday sales,” Premaratne said.
“So that’s something that we will have to watch a little bit more closely as we progress. But at least at this stage the volumes are not reducing, but it’s more about looking at how to share the duty implications.”
The decision to shift will be made on the basis of the final tariff. At the moment Sri Lanka had large gaps in proposed tariffs with Malaysia and India, but not so much with countries like Vietnam.
If you look at Malaysia, the largest glove manufacturers are having 24 percent, whereas we were 44 percent,” Janadehera said. The 20 percent gap, no Sri Lanka manufactures can match.
“And in the solid tires point of view, the largest manufacturer like India having a 26 percent, whereas we were having 44 percent.”
In the short term, buyers were putting pressure on Sri Lanka exporters to share the current 10 percent import duty which is now applicable.
“Even this 10 percent price increase, most of the customers are demanding a price reduction,” Janadeera said.
“Because Trump doesn’t want to increase the prices in domestic market. But we are not having the luxury of giving a 10 percent price reduction at all.
“Some of the customers, due to the relationship, we are giving a 2 percent or 3 percent. Maximum, I can say, the whole industry can accommodate 2-3 percent.” (Colombo/May06/2025)
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