The reduction in US reciprocal tariff on exports from Sri Lanka to 30% from previously announced 44% is positive news for local businesses, however the rate is a substantial increase from the existing 10% duty, Economist Dhananath Fernando stated.

Fernando noted with the increase in the tariff rate, the consumer spending in the US will see a notable drop which will result in the reduction in demand for imported products.

Therefore, the new tariff will reduce the export volume of Sri Lanka which has also been highlighted by the World Bank in a recent report, economist Dhananath Fernando said.

According to Fernando, the real challenge Sri Lanka faces is the tariff imposed by the US on its competitors such as India, Vietnam, Thailand and Bangladesh.

He said Bangladesh has been imposed with a 35% reciprocal tariff which is higher than Sri Lanka but the US is expected to impose a 20% tariff on Vietnam which will be a challenge for Sri Lanka along with India which is also seeking a lower tariff rate from the US.

In terms of rubber exports, Sri Lanka’s competitor Thailand has been imposed with a 36% tariff rate which will give local businesses a competitive advantage, Fernando added.

Economist Dhananath Fernando is of the view that the steep tariff announced by the US President Donald Trump will have an overall impact on exports and the GDP of Sri Lanka.