Sri Lanka’s export sector, including the apparel industry, is expected to be significantly affected by the proposed reciprocal tax law to be introduced by US President Donald Trump. The new tax policy is scheduled to be implemented from April.
The policy aims to address the trade imbalance between the US and Sri Lanka. The US reportedly purchases goods worth US$ 3 billion annually from Sri Lanka, whereas Sri Lanka only purchases goods worth US$ 600 million from the US.
This imbalance causes the US to incur an annual trade deficit of over US$ 2 billion. To recover this loss, the US intends to raise tax rates on goods and services imported from Sri Lanka, according to diplomatic sources.
The new tax will affect many countries around the world, including Sri Lanka. The Trump administration has also decided to treat the Value Added Tax (VAT) on goods and services as a tariff.