High-level diplomatic sources reveal that the new reciprocal tax policy proposed by US President Donald Trump is expected to severely impact Sri Lanka’s exports, particularly garments, to the United States.
The US government plans to implement this new tax policy starting from next April. The objective is to address the existing tax revenue gap between the US and Sri Lanka, ensuring both countries follow a parallel taxation approach.
According to reports, the US imports approximately $3 billion worth of goods from Sri Lanka annually, while Sri Lanka imports only $600 million worth of goods from the US each year. Due to this significant trade deficit of over $2 billion, the US plans to increase tax rates on Sri Lankan goods and services imported into the country.
The new tax policy is not exclusive to Sri Lanka; the Trump administration is implementing similar measures for various countries worldwide. Furthermore, the US has decided to treat VAT levied on goods or services as a form of tariff.
