Business
Going Beyond the US Reciprocal Tariffs: Sri Lanka’s exposure to the tariffs and exemptions
The United States’ (US) proclamation of “reciprocal tariffs” dealt a blow to the global trade system based on the World Trade Organisation (WTO) principles. With the individualised tariff rates, the US has discarded non-discrimination in the Most-Favoured-Nation (MFN) tariff structure. The “reciprocal tariff” rate does not show any reciprocity but rather a calculation hypothesised to drive a bilateral trade deficit to zero.
Although the “reciprocal tariff” grabbed attention, US trade policy under the second Trump administration is more complex. Section 232 of the US Trade Expansion Act of 1962 is being used to target key sectors like steel, aluminium, and auto parts. In addition, investigations are ongoing to determine tariffs for copper, critical minerals, pharmaceuticals, and lumber.
For Sri Lanka, as calculated using 2024 data, 95.6% of US imports are subject to reciprocal tariffs – with the 90-day pause, standing currently as a 10% global tariff. In addition, 4.2% of imports from Sri Lanka are subject to the steel and aluminium and auto parts tariffs imposed under Section 232. However, 0.2% of Sri Lanka’s imports are exempted from the new tariff measures. These exemptions were made by issuing Annex-II of the US Executive Order on the reciprocal tariffs and a notice issued by the US Customs and Border Protection (CBP) on April 12.

Sri Lanka’s Exposure to Section 232 Tariffs:
Steel, Aluminium and Auto Components Tariffs
In 2018, under the first Trump administration, the US imposed a 25% tariff on steel and a 10% tariff on aluminium imported from all trade partners under Section 232 tariffs.
On March 12, 2025, the US expanded the 2018 Section 232, increasing the aluminium tariff to 25%, removing all existing exemptions, and adding more derivative products which use steel and aluminium as components. For example, a keg is an aluminium derivative product. When steel and aluminium imports are expensive due to tariffs, domestic producers are no longer competitive in the production of derivatives such as the keg in the earlier example. This leads to lobbying for cascading protectionist tariffs on imported derivatives. Thus, cascading protectionism means that when a raw material is subject to tariffs in the downstream, the final good becomes less competitive, forcing producers to demand tariff protection for the final goods.
Sri Lanka’s exports will be subjected to an additional 25 per cent of the value of the steel and aluminium content under the 2025-Section-232 tarrifs. The newly added aluminium derivative products account for USD 28.5 Mn in US imports from Sri Lanka, across 27 products. There are USD 80.78 Mn imports under 20 products from Sri Lanka, which are categorised as steel derivatives under the Section 232 Steel and Aluminium tariff proclamation by the US.
New challenges for exporters
One main challenge of the new US tariff structure is the additional reporting requirements to exporters. Notably, the stipulated tariffs will be calculated for the steel or aluminium value of the products, which are exempt from reciprocal tariffs. For example, machinery parts made of steel will be subject to 25% additional steel tariffs, but they are not subject to 10% or 44% reciprocal tariffs. If the machinery parts contain 60% steel value, then the 25% tariff is applied for the 60% steel value. The remaining 40% is subject to the relevant tariff line specified for machinery parts. The exporters need to report on the aluminium and steel content by value, and failure to do so will result in an additional 25% tariff on the whole product’s value.
Lack of information on the steel and aluminium content makes reporting challenging for exporters. Although tariff calculations need the aluminium or steel value, that information is not given in publicly available data; the calculation of tariff increases needs assumptions. Assuming 25% of product value, the fabricated metal sector sees a weighted average tariff increasing to 6.7% from the base tariff rate of 0.6%. The Section 232 products are not subject to reciprocal tariffs. It explains the stable weighted average tariff rate for the fabricated metal sector, even after applying a 10% global tariff and 44% reciprocal tariffs in Figure 2.

The US also announced tariffs on automobiles and parts on March 26 and enacted auto tariffs on April 03. However, the tariffs on automobile parts were delayed to a future date not later than May 03, 2025. The auto components account for 0.5% or USD 10.9 Mn exports by Sri Lanka. New pneumatic radial tyres, non-cellular vulcanised rubber articles, and electric control apparatus are among the products subject to auto component tariffs. As shown in Figure 2, the effective weighted average tariff for motor vehicle sector exports from Sri Lanka to the US will increase to 19.66% on May 03.
Exemptions from some additional tariffs have little Implications for Sri Lanka.
The US exempts certain products necessary for the US domestic industries or those that are subject to Section 232 tariffs. Ten products exported by Sri Lanka are exempted from the reciprocal tariffs, including natural rubber and natural graphite (Figure 3). Natural graphite is an essential component and critical mineral in EV battery manufacturing. On April 12, the US Customs and Border Protection (CBP) released another list of exemptions, primarily composed of electronic equipment. The exemptions exclude products from the direct effect of additional tariffs. However, there is no added advantage from this exclusion, as all countries receive the exemptions, eliminating any relative price advantage for Sri Lanka.

Note: These exemptions were made by issuing Annex-II of the US Executive Order on the reciprocal tariffs and a notice issued by the US Customs and Border Protection on April 12.
Reciprocal Tariffs: Effective Tariff Rates for Sri Lanka
As a 44% “reciprocal tariff” will not be imposed until July, the current effective tariff rate is the MFN rate plus 10%, which applies to 95.6% of Sri Lanka’s exports to the US, worth USD 2.93 Bn. Accordingly, since April 05, the apparel sector has had a 26.65% average tariff (Figure 4). The base MFN tariff average for wearing apparel was 16.65%.

Sectors such as rubber, other manufacturing products, including gems and precious stones, and food preparations experience the most significant relative tariff hikes. These sectors had tariff rates that were less than 2% before April 05. Notably, 37.7% of Sri Lanka’s apparel exports go to the US, while the US share in other manufacturing products is 67.6% (Figure 4). The high reliance on these sectors increases their vulnerability to tariff shocks and plunges in demand in the US market.

As the Section 232 steel and aluminium tariffs, 10% global tariff, and exemptions are already effective, a significant challenge exporters face is meeting reporting requirements. For example, exporters need to report the steel and aluminium content for tariff calculations, and failure will result in the automatic application of 25% to the total value of the derivative product.
In addition, the country of origin of steel and aluminium used in derivative products should be declared to avoid the 200% tariff imposed for aluminium and steel from Russia. Thus, reporting can be a technically challenging and costly task for exporters.
In addition, Sri Lanka needs to be vigilant and follow the US CBP guidance to avoid higher tariffs due to rules of origin; If a different country is identified as the country of origin, Sri Lanka must pay the tariff rate applied to that particular country. Irrespective of the outcome of negotiations on the 44% reciprocal tariffs, the Section 232 tariffs, reporting requirements, and rules of origin complexities will prevail. The necessary technical assistance should be provided to the exporters to minimise the tariff cost under the current US trade policy regime.
By Dr AsAnkA
Wijesinghe
Business
Hour of reckoning comes for SL’s power sector
By Ifham Nizam
A long-delayed reckoning in Sri Lanka’s power sector is finally beginning to take shape—driven less by choice and more by necessity.
At a time when the country’s fragile economic recovery hinges on stability, the electricity sector—long plagued by inefficiency, political interference, and costly dependence on imported fuel—has re-emerged as both a risk and an opportunity.
It is within this context that The Institution of Engineers, Sri Lanka will host a timely and potentially consequential forum on April 2 at the Wimalasurendra Auditorium, focusing on a “Pragmatic Approach to Electricity Sector Reforms in Sri Lanka and the Way Forward.”
This is not just another technical discussion. It is, in many respects, a reality check.
The keynote address by Eng. Pubudu Niroshan—who stood at the centre of recent reform efforts as Director General of the Power Sector Reforms Secretariat—comes at a moment when the gap between policy ambition and execution has become impossible to ignore.
For over three decades, Sri Lanka has spoken the language of reform. Yet, time and again, progress has been derailed by institutional resistance, political hesitation, and an entrenched reluctance to dismantle inefficient structures.
The result is a sector that continues to bleed financially while passing the burden onto consumers and the broader economy.
High electricity tariffs, supply vulnerabilities, and operational inefficiencies are no longer isolated technical issues—they are macroeconomic threats. Industries struggle to remain competitive, investors remain cautious, and households continue to bear rising costs. The over-reliance on imported fossil fuels has only deepened this vulnerability, exposing the country to global price shocks and geopolitical disruptions.
The economic crisis of 2022 briefly forced a shift in thinking. Under severe fiscal pressure, reform was no longer optional. The passage of the Sri Lanka Electricity Act, No. 36 of 2024 was seen as a breakthrough—an acknowledgment that structural change could no longer be postponed.
But legislation alone does not transform systems.
What has followed is a more grounded, outcome-driven approach—one that attempts to move beyond policy rhetoric. Within a relatively short span, the first phase of restructuring has been pushed through, including the repeal of the decades-old CEB Act, No. 17 of 1969, and the unbundling of the monolithic utility into six state-owned entities.
This is, by any measure, a significant structural shift.
Yet, the real test lies ahead.
Unbundling without genuine market discipline risks becoming another cosmetic exercise.
The promise of a competitive National Electricity Market—long discussed but never realized—will depend heavily on regulatory strength, transparency, and political consistency. Without these, the same inefficiencies could simply be replicated across multiple entities.
Moreover, reform cannot succeed in isolation.
Sri Lanka’s energy transition must be anchored in a broader economic strategy—one that aligns power sector reforms with industrial growth, environmental sustainability, and investment policy.
The proposed “Energy Transition Act,” now under consideration, will be a critical piece of this puzzle. If executed with clarity and discipline, it could provide the legal backbone for a coherent and forward-looking energy framework.
The reference to an Integrated Economic Development Framework (IEDF) in the 2026 Budget underscores this necessity. Energy is not a standalone sector—it is the foundation upon which economic recovery will either stand or falter.
What makes this moment different is the absence of alternatives.
Sri Lanka can no longer afford half-measures or delayed decisions. The cost of inaction is too high, and the margin for error too narrow. Reform, in this sense, is no longer a policy preference—it is an economic imperative.
The upcoming forum at The Institution of Engineers, Sri Lanka is therefore more than a professEng. Pubudu Niroshanional gathering. It is a critical platform where technical expertise must confront political reality, and where long-standing assumptions must be challenged.
For years, Sri Lanka’s electricity sector has been caught in a cycle of discussion without delivery. The shift toward a pragmatic approach signals an understanding that outcomes—not intentions—will define success.
The question now is whether that realization will finally translate into sustained, irreversible change.
Because this time, failure is not just an option—it is a risk the country simply cannot afford.
Business
Dialog introduces Samsung Galaxy S26 Series with AI-powered camera and 5G Connectivity
Dialog Axiata PLC, Sri Lanka’s #1 connectivity provider, announced the availability of the Samsung Galaxy S26 Series in Sri Lanka through its retail and digital channels, bringing Samsung’s latest flagship smartphone lineup to local consumers. The series includes the Galaxy S26, Galaxy S26+, and Galaxy S26 Ultra, combining advanced AI-powered capabilities, premium design and next-generation connectivity for everyday mobile use, with customers able to experience the power of Dialog 5G Ultra on the devices.
The Samsung Galaxy S26 Series introduces an AI-powered camera system featuring a 200MP AI-enhanced rear camera with improved low-light performance, advanced zoom and intelligent editing tools for capturing and refining content directly on the device. The lineup also includes Galaxy AI capabilities, a privacy display that limits viewing angles to protect on-screen information, and steady video functionality for smoother and more stable video recording.
The Galaxy S26 Series features Dynamic AMOLED displays across the lineup, including a 6.3-inch Galaxy S26, 6.7-inch Galaxy S26+, and 6.9-inch Galaxy S26 Ultra, supporting smooth performance for streaming, gaming and everyday productivity. The devices are available with 12GB RAM and storage options of 256GB or 512GB, while the Galaxy S26 Ultra also offers a 16GB RAM variant with up to 1TB storage for users requiring additional capacity.
Business
Ideal Motors celebrates gala ‘Excellence Awards’ honouring outstanding performance
The Mahindra Ideal Excellence Awards ceremony, a grand celebration to recognize dealers and other stakeholders of Ideal Motors, was held at the Wave n’ Lake Banquet Hall & Restaurant in Welisara recently.
The event was graced by the presence of special guests including Nalin Welgama, Founder and Chairman Ideal Motors, Dilani Yatawaka, Group Managing Director/CEO Ideal Motors, Nimisha Welgama, Director Legal and Corporate Affairs Ideal Motors, Sachin Arolkar, Head International Operations, Auto Division Mahindra & Mahindra India. Senthil Selvaraju, Head International Operations and Customer Service Automotive Division Mahindra & Mahindra India, Sujeeth Jayant, Country Head Mahindra & Mahindra India and Shitam Kundu, Head Domestic Services Mahindra & Mahindra India.
Also, in attendance from Ideal Motors were Kasun Fernando, General Manager Commercial Vehicle Sales Division, Sameera Bamunuarachchi, Deputy General Manager Spare Parts, Logistics & Inventory and Prasanna Manamperi, Deputy General Manager After Seles Service.
The Excellence Awards ceremony honoured the top sales dealers at the provincial and national levels. Recipients were presented with awards, certificates of merit, and cash prizes in recognition of their achievements. The three best national‑level sales dealers from the various categories were further rewarded with an opportunity to visit Bangkok, Thailand. In addition, special recognition was extended to banks and financial institutions that partner with Ideal Motors.
Speaking at the event, Nalin Welgama Ideal Motors Founder and Chairman said, “When we began our journey with Mahindra in 2009, the previous company had sold 300 vehicles in the country, of which nearly 150 had various defects. At that time our journey began by engaging with the parent company in India and repairing those vehicles free of charge. That commitment has brought us to where we are today. As we believe, our journey truly begins after the sale. We are dedicated to strengthening our customers, and in doing so, strengthening ourselves. That is how we transformed the after‑sales service experience.”
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