Sri Lankan goods entering the United States are subject to a 10% import tariff from Friday, after a last-minute regulation on forced labour moved the island out of the higher 12.5% band it had been placed in weeks earlier.
The tariff takes effect under a notice issued by the Office of the United States Trade Representative, which placed 60 trading partners in two bands. Sri Lanka qualified for the lower rate after adopting, partially implementing, or committing to enforce restrictions on imports linked to forced labour. A further 41 economies deemed not to have adopted such restrictions face 12.5%, among them China, Japan, Singapore, Australia, South Korea, Thailand and Vietnam.
Sri Lanka now faces the same rate as India, Bangladesh, Pakistan, Malaysia, Indonesia, Canada, Mexico and the United Kingdom, along with the European Union and Taiwan.
An eleventh-hour gazette
The outcome reverses the position set out in the USTR's determination in June, which had listed Sri Lanka among the economies facing the higher rate, while Bangladesh, Cambodia, Pakistan and Indonesia were marked for the lower band. That prospect alarmed the island's garment manufacturers, who had lobbied Washington for parity with competitors, warning that a differential of 2.5 percentage points would push buyers towards rival sourcing markets.
Sri Lanka's eligibility followed a gazette issued by Sri Lankan president Anura Kumara Dissanayake on 10 July, immediately prohibiting the importation of goods produced wholly or partly using forced labour and requiring importers to submit certified documentation to Sri Lanka Customs confirming compliance.
The measure was introduced expressly to avert the higher levy.
A rebuilt tariff regime
The tariffs stem from investigations opened in March under Section 301 of the US Trade Act of 1974, which allows the administration to impose duties in response to trade practices it considers unfair. The US Trade Representative, Jamieson Greer, said decades of moral persuasion had failed to remove forced labour from global supply chains, and that trading partners should match the American import ban, which has been in force for close to a century.
The action covers the top 60 US trading partners, accounting for the overwhelming majority of American imports. Goods loaded and in transit before Friday escape the duty if they are entered before 28 July.
The regime is the product of a legal reconstruction of the administration's trade policy. Sri Lankan exports were initially threatened with a 44% tariff, later reduced to 20%, before the US Supreme Court ruled in February that the president had exceeded his authority in imposing the earlier duties. A temporary 10% tariff applied under alternative powers expires on Friday and is replaced by the new measures, which route the same policy through the Section 301 mechanism.
Trading partners have disputed the basis of the action. The European Union described the reasoning as unjustified, while China said it opposed unilateral restrictions of any kind.
Exposure of the apparel sector
The stakes are considerable for an economy still recovering from the sovereign default of 2022. Apparel is Sri Lanka's largest manufacturing export, worth around 5 billion US dollars in 2025, and the United States is its single biggest market, taking close to 40% of garment exports.
The sector entered the year under strain. Apparel and textile exports for the first five months of 2026 fell 4.68% year on year to 1.93 billion dollars, with the United States, European Union and United Kingdom all in negative territory, before a partial recovery in May, when monthly exports rose 7.96% to 394.14 million dollars and shipments to the United States climbed 15.36% to 149.96 million dollars.
Colombo had earlier warned of severe consequences for the industry when Washington announced a 30% tariff on Sri Lankan exports, prompting an intensive lobbying effort.
