Dr Asanka Wijesinghe Presents Insights on the Economic Consequences of US Tariffs

14 August, 2025

“The United States’ recent tariff hike could significantly impact Sri Lanka’s economy, with apparel and rubber exports facing the steepest threat,” explained IPS Research Fellow, Dr Asanka Wijesinghe, during a presentation of preliminary findings on the impact of US tariffs. Dr Wijesinghe stated that as a result of this situation, wearing apparel and rubber product exports will now face tariffs of 36.8% and 20.2% respectively. Dr Wijesinghe’s findings estimate that under a 20% reciprocal tariff scenario, Sri Lanka’s real Gross Domestic Product (GDP) could shrink by 0.007%, with total exports to the US dropping by 20.5%.

“A total of 15,853 jobs in the apparel sector, primarily held by unskilled female workers, are at risk,” observed Dr Asanka Wijesinghe. “Additionally, Sri Lanka’s exports are disadvantaged by these higher relative prices, while competitors with Free Trade Agreements with the US, like Mexico and Canada, benefit from favourable tariff differential.”

Dr Wijesinghe’s findings show strong economic incentives for Sri Lanka to further engage in negotiations for tariff reduction. “A 15% reciprocal tariff, coupled with the removal of para-tariffs (CESS and PAL) for US imports could result in a 0.038% positive GDP growth, while further reductions to 10% tariffs could yield even greater economic benefits,” he explained.

Dr Wijesinghe discussed that deep concessions will need reciprocal concessions to the US, which can affect the domestic output of agricultural sectors like dairy. The estimates assume that the US will maintain current tariff rates for the other countries.

The study used the Global Trade Analysis Project (GTAP) model, a computable general equilibrium (CGE) model, for simulations with an updated base year for 2024.

Dr Wijesinghe shared these insights at a presentation of his findings to key stakeholders and policymakers, including representatives from government agencies, foreign missions, and the private sector. The presentation, which was held at IPS on 14 August 2025, was a great forum for participants to discuss related issues and better understand the findings of this study.