Courtesy The Daily Mirror

Colombo, July 10 (Daily Mirror) – The United States yesterday”s announcement of a 30% tariff on Sri Lankan imports marks a significant blow to the country’s export sector, with estimated losses projected between USD 1.2 to 1.5 billion over the next 12 months. However, former Ambassador Kananathan has emphasized that this development should serve not just as a setback but as a critical turning point.

This is a wake-up call for Sri Lanka’s export economy,” Kananathan said. Over-reliance on a single market, limited diversification, and a lag in innovation have left our industries exposed.”

The gap may widen further unless Sri Lanka shifts toward cost efficiency or niche product development and  have a diverse export portfolio like Malaysia (electronics) or Vietnam (tech, furniture, seafood). The new 30% tariff is applied in addition to the existing 10%, effectively raising the total duty to 40%. goods are still more expensive than those from Malaysia, India, Bangladesh and Vietnam. This put Sri lanka on a price disadvantage. Tariff disadvantages may push U.S. buyers and investors to shift operations to Vietnam, Bangaladesh  or India. This hurts FDI inflows, especially into Sri Lanka’s apparel sector, which employs hundreds of thousands. In the case of apparels despite the new tariff for Bangaladesh  is increased to 35% Bangladesh remains cheaper than Sri Lanka.

This is due to lower production costs, high-volume capability,and lower factory costs due to cheap labor and material

He stressed that the urgent need for a strategic reset: We must seize this moment to recalibrate building a stronger, more diversified, and future-ready export model.

Kananathan pointed to regional integration as a key opportunity. Greater cooperation through platforms such as SAARC, BIMSTEC, and the pursuit of new Free Trade Agreements could offer Sri Lankan exporters improved market access and leverage.

He also highlighted the potential of technology-enabled exports. Sectors like software development, business process outsourcing (BPO), and financial services are immune to traditional trade barriers such as tariffs and offer substantial growth prospects. Scaling these industries should be a national priority.”

With the vulnerabilities of U.S. market dependence laid bare, Sri Lankan exporters are being urged to look outward. Markets in Europe, Asia, and the Middle East remain underexplored. The EU’s GSP+ scheme continues to provide preferential access, while regions such as India, ASEAN, and parts of Africa present significant untapped demand.

Kananathan’s forward-looking message said The road ahead will be challenging, but with the right reforms and strategic focus, Sri Lanka can emerge more resilient and competitive on the global stage