The new tax America is going to impose on Sri Lanka

Sri Lanka's export economy faces a significant risk of severe impact due to a recent trade investigation launched by the United States. The US has identified 54 countries that have failed to prevent goods produced using forced labor from entering its market, and Sri Lanka is included in this list.

Under these circumstances, the proposal by the United States Trade Representative (USTR) to impose an additional 12.5% tax on imports from Sri Lanka will pose a significant challenge to the country's exporters.

This proposed new tax policy is expected to directly impact Sri Lanka's apparel industry, which is one of its primary export sectors. The United States is also the largest single buyer in Sri Lanka's apparel sector, a sector renowned internationally for adhering to ethical production practices. For local exporters, already facing significant pressure from rising transport and supply costs, declining consumer demand in the global market, and the uncertain nature of various trade policies, this new tax proposal will undoubtedly create another serious problem.

This comprehensive investigation was launched last March under Section 301 of the 1974 US Trade Act. It rigorously examined whether trade partner countries have taken the necessary steps to prevent the import of goods produced by forced labor. However, the United States Trade Representative's office concluded that all 60 economies under investigation failed to impose proper restrictions or implement them effectively. Consequently, in addition to Sri Lanka, numerous leading manufacturing and exporting nations such as China, India, Bangladesh, Vietnam, Thailand, Malaysia, and South Korea will also face these penalties.

Commenting on the matter, US Trade Representative Jamieson Greer emphasized that the failure of key trade partners to prevent the import of goods produced through forced labor is entirely unacceptable. He highlighted that such circumstances have compelled American workers to compete in an unequal market, and this injustice can no longer be tolerated. He further stated that while some countries have taken initial steps through trade agreements like USMCA, they must demonstrate further commitment to preventing the global proliferation of forced labor.

These proposed measures have not yet been finalized and have been opened for a public comment process. Accordingly, a deadline of July 6 has been set for submitting written comments on the relevant proposals, with a public hearing scheduled for July 7. Concurrently, a separate mechanism has also been proposed to allow a limited quantity of specific textiles and apparel imported from certain economies to enter the American market under reduced tax rates. Through this entire process, the United States aims to further strengthen its trade law enforcement by rigorously monitoring supply chains connected to forced labor.