Sri Lanka’s apparel industry showed encouraging signs of recovery in May 2026, with stronger overseas demand lifting export earnings and reinforcing the United States’ position as the country’s most important apparel market. However, the sector’s improving outlook is now closely linked to the outcome of ongoing tariff discussions with Washington.
According to the latest trade data, Sri Lanka apparel exports reached US$394.14 million in May, representing a 7.96% year-on-year increase and marking the industry’s strongest monthly performance so far in 2026.
The United States accounted for the largest share of this growth. Exports to the American market climbed 15.36% from a year earlier to US$149.96 million, highlighting robust demand despite ongoing global economic uncertainty.
Shipments to emerging and non-traditional markets also posted healthy gains, rising 14.61% to US$70.67 million. Performance in more established destinations, however, remained relatively modest. Exports to the United Kingdom edged up only 0.87%, while shipments to the European Union declined slightly by 0.3%, totaling US$121.35 million.
The latest figures indicate that the Sri Lanka apparel exports recovery is becoming increasingly dependent on the US market. Although exporters continue to diversify into new destinations, American consumer demand remains the primary driver of short-term growth.
This dependence also exposes the industry to trade policy risks. Manufacturers are closely monitoring proposed US tariff measures scheduled to take effect on July 24, which could significantly affect the competitiveness of Sri Lankan apparel in its largest export market.
Under the proposed framework, Sri Lankan garment exports would face an additional 12.5% tariff, compared with a 10% tariff proposed for several competing apparel-producing countries. While the difference appears relatively small, industry stakeholders believe it could reduce Sri Lanka’s pricing advantage and influence sourcing decisions by international buyers.
The Joint Apparel Association Forum (JAAF) has emphasized that maintaining the industry’s current growth momentum will largely depend on securing a competitive tariff arrangement with the United States. Industry leaders remain optimistic that a favorable trade outcome could support stronger export performance during the second half of 2026 and transform the recent recovery into sustained long-term growth.
The Sri Lankan government is also working to finalize negotiations before the proposed tariff changes are implemented. The Ministry of Trade, Commerce, Food Security, and Co-operative Development has indicated that discussions with US authorities are nearing completion, with efforts focused on reaching an agreement that would prevent the higher tariff from being applied.
The urgency reflects a policy introduced by the Office of the United States Trade Representative (USTR), which grants a lower 10% additional tariff to countries that have adopted or committed to reciprocal forced-labour import restrictions. Unless Sri Lanka reaches a similar agreement, its apparel exports could remain subject to the higher 12.5% tariff.
With export growth regaining momentum, the outcome of these trade negotiations is expected to play a decisive role in determining whether the recent improvement develops into a lasting expansion or remains a temporary rebound for Sri Lanka’s apparel industry.
