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WORLD BANK SAYS: US TARIFF THREATENS 12% DROP IN RMG EXPORTS

WORLD BANK SAYS: US TARIFF THREATENS 12% DROP IN RMG EXPORTS

09 Oct 2025 | By Imesh Ranasinghe


  • The 20% US export tariff could decrease ready-made garment (RMG) exports by $ 220 m annually
  • The change is expected to disproportionately affect 16,000 unskilled workers and women


Sri Lanka’s ready-made garment (RMG) exports to the US could be reduced by 12% annually with the 20% tariff on exports, while 16,000 unskilled workers and women would be affected, the World Bank said.

In their Sri Lanka Development Update report, they said that the impact on the current account from the 20% tariff is manageable, but low-skilled workers are highly vulnerable.

“It is estimated that the 20% tariff could decrease Sri Lanka’s RMG exports to the US by 12% ($ 220 million compared to the baseline),” the report said.

It added that the impact on employment, which would disproportionately affect unskilled workers and women, is estimated to be 16,000.

“Assuming 40-50% domestic value addition (in line with industry estimates), the impact on the current account would be approximately $ 110 million to $ 130 million (0.1% of GDP),” the World Bank said.

Moreover, it said that a similar decline of $ 110 million to $ 120 million (0.1% of GDP) may be expected in exports of rubber products (relative to the baseline), while the overall impact of the tariff structure (if it remains unchanged) on the current account (0.2% of GDP) is currently manageable.

Further, the report said that the parity in tariff rates with competitors suggests a limited possibility for trade diversion of RMG, as Sri Lanka’s tariff rates are comparable to those of the major competitors like Vietnam, Bangladesh, Cambodia, and Indonesia.

The World Bank said that the industry believes the parity in tariffs with major competitors would reduce the possibility of trade diversion, especially given that markets with a high degree of complementarity in export bases (such as Vietnam and Cambodia) have similar tariff rates.

Also, it said that given the limited overlap with India’s export base, it is unlikely that Sri Lanka might benefit from the impact of the 50% tariff on India.

“The composition of Sri Lankan apparel exports makes them relatively resilient compared to competitors,” the World Bank said.




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