Highlights

• 85% of Lankan rubber products shipped to US, EU markets
   
• Tariffs can diminish 28% of US rubber products export revenue
   
• Govt allocates LKR 1500 million for rubber industry in Budget

Sri Lanka, which is one of the economies facing a profound impact of Trump’s tariff measures, has initiated steps to mitigate the impact on sectors, including rubber products exports. Though the country, too, has been able to heave a sigh of relief with a 90-day breather for reciprocal tariffs, it has decided to use the window to negotiate with the US so that the island nation’s economy does not feel the pinch.

The United States is Sri Lanka’s single largest export destination, absorbing 23% of its merchandise exports. Sri Lanka’s NR exports to the United States were worth US$1.2 million in 2024. More than 85% of Lankan rubber products are shipped to the U.S. and EU markets, with tires and gloves holding a major share.

Rubber products are Sri Lanka’s second-largest export to the US, accounting for 11% of exports, exceeding US$300 million in 2023. It is estimated that the tariff measures in the current form can make a 28% dent in Sri Lanka’s returns from rubber product exports to the US.

The Sri Lanka Export Development Board (EDB) recently organized a stakeholder consultation to discuss strategies for mitigating the potential adverse impact of the 44% reciprocal tariff by the United States on Sri Lankan exports, now kept in abeyance, apart from the 25% tariffs on automobiles and auto parts, including tires.

Different measures to deal with tariff blow

The meeting, chaired by Mr. Mangala Wijesinghe, Chairman and Chief Executive Officer (CEO) of the EDB, brought together representatives from leading trade associations and chambers to assess the implications of the tariff hike and explore possible response measures.

During the discussion, the EDB chairman outlined the steps taken by the Government of Sri Lanka, including diplomatic engagements with US authorities, submission of formal appeals, and plans to dispatch a diplomatic delegation for further negotiations.

Representatives from various export sectors, including rubber industries, highlighted challenges such as suspended or delayed orders from US buyers. Participants proposed several potential responses to mitigate the situation, including strengthening government-to-government negotiations, leveraging Sri Lanka’s engagement with the IMF to provide short-term relief for exporters, and cautiously exploring reciprocal trade concessions.

The need to diversify export markets beyond the US, particularly in Southeast Asia, the Middle East, and Africa, was strongly emphasized. Suggestions were also made to offer short-term support measures, such as reducing freight costs and measures to reduce the cost of production, while engaging directly with US stakeholders to highlight the adverse impact of the tariffs on American consumers and businesses. 

The stakeholders resolved to work collaboratively with the Sri Lankan government to navigate the challenges and safeguard the country’s export sector.

Source: SL Export Development Board and Helixtap

Sri Lanka ranks fifth globally in glove manufacturing

The Colombo Rubber Traders Association (CRTA) said the NR industry chips in for jobs and the foreign exchange in a significant manner. When the additional 44% tariff joins the existing 12.5% duty, the total duty will go up to 56.5%, dealing a body blow to various (non-auto rubber) exports to the US market, the association pointed out. “This will have a far-reaching impact on tappers, their families, apart from the rubber farmers and their families,” the CRTA said. Sri Lanka has nearly 150,000 rubber tappers.  

Sri Lanka’s rubber products currently hold a modest 0.25% share of the global market, yet 80% of its revenue is derived from value-added products. Sri Lanka ranks fifth globally in glove manufacturing, and 500,000 people employed in plantations and manufacturing industries cater to the sector.

As the global hub for solid tyre manufacturing, Sri Lanka supplies to nearly 25% of the global demand for solid and industrial tyres, with almost all leading brands in the solid tyre industry in the world claiming a stake in the local production landscape. Solid tire, which predates pneumatic tyres, still plays an important role in agriculture, industrial, and logistics sectors.

Export earnings register a dip YoY in February

Sri Lanka’s export earnings from rubber and rubber finished products decreased by 6.33 % year on year to US$83.11 million in February 2025, under the impact of the poor performance in the exports of pneumatic and retreated rubber tires and tubes (-21.38 %). However, this was an improvement upon January 2025 figures of US$75.06 million.

The export earnings from rubber and rubber finished products fell by 7.2 % to US$158.18 million in January–February 2025 compared to the same period in 2024, due to reduced exports of pneumatic and retreated rubber tires and tubes (-27.2 %).

In February, the Sri Lankan rubber market witnessed a squeezed supply, down to 577.3 tons from 711.3 tons in the previous month amid price declines. The local rubber-based industries reported soft demand amid looming US tariff burdens and sliding crude oil prices.

RSS imports were reported at a larger scale at rates cheaper than domestic rates. Domestic RSS grades were not finding their way to the market, with producers mostly channelling latex to processing centers while limited sheets were kept back by producers, citing lower prices.

Meanwhile, the Sri Lankan Government has made a budgetary allocation of LKR 1500 million for the rubber industry this year to set up an industrial estate specially for manufacturing value-added automobile components and rubber products. 

“A significant level of investment in the domestically value-added automobile manufacturing/assembly industry and rubber product manufacturing is an important factor to cater to the demand required by the components manufacturing industry to become competitive in the export market. With this purpose, it is proposed to establish an Industrial Estate dedicated to automobile components and rubber manufacturing,” the budget document said.