Sri Lanka’s Trade Crossroads: Can It Join the Low-Tariff Club Without Ruffling China, India, or Russia?

Sri Lanka finds itself at a critical juncture in its global trade journey. With the recent reduction of US tariffs from a staggering 44% to a still hefty 20%, the island nation has taken a promising step forward. But the big question remains: can Sri Lanka join the coveted club of countries enjoying the lowest US tariffs — like the UK, Australia, and New Zealand — without jeopardizing its delicate ties with powerful neighbors and allies such as China, India, and Russia?

The Low Tariff Club: Who’s In?

The Low Tariff Club is an informal term for countries and territories that benefit from reciprocal tariff rates as low as 10% or less under US trade policy. Members of this group enjoy significant competitive advantages in accessing the US market due to reduced duties on their exports.

Current members include:

United Kingdom (10%)

Australia (10%)

New Zealand (15%)

Brazil (10%)

Falkland Islands (10%)

These countries have managed to secure trade arrangements or diplomatic understandings with the US that allow them to keep tariffs low, enabling their exporters to compete effectively in the lucrative American market.

For Sri Lanka, currently at 20%, joining this club would mean a major boost for exporters and investors, increasing the country’s appeal as a trade partner and strengthening its economic outlook.

Walking a Diplomatic Tightrope

However, Sri Lanka’s path isn’t straightforward. Its geopolitical location in the Indian Ocean has long made it a point of interest for global powers. China, a key economic partner and investor, continues to deepen ties through infrastructure projects and trade. India, a regional powerhouse and neighbor, has its own strategic ambitions in the region, and Russia, while less economically involved, remains a significant political ally.

Any overt pivot towards the US — especially in defense and trade — risks unsettling this balancing act. Aligning too closely with the US trade framework might invite political and economic pressure from China and India, both wary of increased American influence in the region. Moreover, Sri Lanka’s public and political spheres remain cautious about compromising sovereignty or becoming a pawn in great power rivalries.

The Strategy: Pragmatism Over Ideology

Experts suggest that Sri Lanka’s best chance lies in pragmatic diplomacy — negotiating trade agreements that offer incremental tariff relief and enhanced market access without demanding concessions that would alienate China, India, or Russia.

Efforts such as reducing corruption, streamlining customs, and embracing transparency — all praised by US negotiators — can build goodwill and improve Sri Lanka’s trade profile globally. The government’s ongoing discussions on intellectual property rights, agricultural market access, and even energy imports from the US signal a willingness to engage but within a carefully controlled framework.

Beyond Tariffs: Diversifying Partnerships

Sri Lanka should also diversify its trade partnerships beyond traditional giants. Expanding ties with Southeast Asian nations, the Middle East, and Africa can reduce overdependence on any single bloc. Investing in technology transfer, digital economy growth, and sustainable tourism can create new competitive advantages, lessening the need for aggressive tariff battles.

Can Sri Lanka Make the Cut?

The truth is, joining the elite low-tariff group requires more than economic reforms. It demands diplomatic finesse, strategic clarity, and above all, a national consensus on Sri Lanka’s long-term vision.

With President Anura Kumara Dissanayake’s government showing signs of openness to reform and the Treasury’s active negotiations with the US, the winds of change are blowing. Whether Sri Lanka can seize this opportunity without upsetting its complex international relationships remains the million-dollar question.

For now, the island nation stands at a crossroads — with a chance to elevate its trade standing while maintaining its historic friendships. The coming months will reveal whether Sri Lanka can truly master the art of balancing trade, diplomacy, and national interest on the global stage.