Sri Lanka’s ready-made garment (RMG) sector faces a sharp challenge as a 20% tariff imposed by the United States could reduce the country’s garment exports to the US by 12% annually, the World Bank has warned.
According to the World Bank’s latest Sri Lanka Development Update, this tariff could result in a $220 million drop in RMG export revenue and lead to the loss of approximately 16,000 jobs—disproportionately impacting unskilled workers and women, who form the backbone of the industry.
While the overall effect on Sri Lanka’s current account is expected to be manageable, estimated at a reduction of 0.2% of GDP when combined with potential declines in rubber product exports, the social impact on vulnerable workers remains a serious concern.
The report highlights that Sri Lanka’s tariff rates are broadly in line with regional competitors such as Vietnam, Bangladesh, Cambodia, and Indonesia, limiting the risk of trade diversion away from the country.
It also suggests that Sri Lanka’s apparel export composition renders it relatively resilient compared to its peers.
However, the World Bank cautioned that the sector’s heavy reliance on low-skilled labour means the economic shock could deepen inequalities and job losses among the most vulnerable groups.
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