Sri Lanka Caught in the Middle of a US-China Tug-of-War

Here’s what’s really going on behind the scenes. Sri Lanka recently got a small win in its trade talks with the United States — the tariffs on Sri Lankan goods entering the US were reduced from 44% to 30%. That’s better than what some other countries like Bangladesh, Myanmar, and Cambodia are facing. So far, so good.

But there’s tension brewing underneath. The US, under President Trump, has made it clear that they’re not happy with what they see as an unbalanced trade relationship. Trump even wrote directly to Sri Lankan President Anura Kumara Dissanayake, complaining that Sri Lanka’s trade policies are unfair and calling the trade imbalance a threat to US national security.

In that same letter, Trump warned that the 30% tariff could go even higher if Sri Lanka tried to retaliate. He also dangled an offer: Sri Lankan companies could avoid tariffs altogether — if they shifted their manufacturing operations to the US. That’s a big ask.

Now here’s where it gets complicated. During these negotiations, US officials also reportedly asked Sri Lanka to place restrictions on trade with China. That’s a sensitive issue. Sri Lanka, sticking to its policy of being neutral, refused. It wants to keep good relations with all countries — including China — and doesn’t want to be forced to choose sides.

People close to the talks aren’t saying much more, but the message is clear: the US is using trade to apply pressure, and Sri Lanka is trying not to get pulled into the middle of a global power struggle.

Meanwhile, Sri Lanka isn’t too happy that countries like Vietnam, one of its main competitors in apparel exports, got even lower tariffs. So while the reduced rate is better than before, it’s not the best deal out there — and Sri Lanka knows it.

In short, Sri Lanka is walking a diplomatic tightrope. It wants to stay friends with both the US and China, but with global tensions rising, that balancing act is getting harder by the day.