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S
halika first learned about the tariffs — or at least what they will mean for her – when management officials at the garment factory where she works informed her and her co-workers that since orders will likely be reduced, they would be shifted to contract-based jobs with more holidays and off-days.
“There is already a cutback on overtime and we can’t survive on basic salary alone,” says Shalika (not her real name) in a phone call from her village of Killinochchi, in Sri Lanka’s Northern Province. “We are worried that we will lose our jobs.”
Sri Lanka is among countries in Asia hit recently with high tariffs by the U.S. government led by President Donald Trump. Announced last April, the tariffs have since been put on hold for 90 days. Sri Lanka is looking at tariff rates of 44 percent on its exports to the United States by July 9 if Colombo is unable to strike a deal with Washington before that date. So far U.S. and Sri Lankan officials have had two rounds of talks, but as of this writing no announcement has been made about any new trade agreements between the two countries.
This has put Shalika and hundreds of thousands of other workers in Sri Lanka’s export industries in limbo. But while Sri Lankan officials have been praised by business groups for quickly forming committees to address the U.S. tariff issue, labor rights advocates and other observers say that affected workers have not even been invited to the table. Or as Chamila Tushari, executive director of the Dabindu Collective, a non-profit organization promoting women worker rights in the Free Trade Zone of Katunayake in western Sri Lanka, puts it, workers have had no say in any of the discussions or plans.
In a May 2025 article in the U.S. publication Jacobin, Social Scientists’ Association researcher Taniya Silvapulle comments on the National People’s Power (NPP)-led government’s recent efforts to gather opinions on the tariffs: “(None) of these engagements have involved the working class or the trade unions that claim to represent them.
She adds: “In what can only be seen as a glaring omission for a party rooted in a left-wing tradition, the government’s consultations have been exclusive to capital — local industry leaders, multinational corporations, and technocrats. Where are the workers in this process? Where is the engagement with trade unions, cooperatives, or informal sector organizations that would bear the brunt of any economic fallout from a contraction in export demand?”
Tushari, whose organization has been advocating for garment workers’ rights for the past 41 years, also points out that while Sri Lankan manufacturers have been in constant talks with the government, they have also been busy making their own plans. In fact, homegrown textile giant Teejay Lanka recently announced that it was considering transferring orders to its manufacturing facilities outside of Sri Lanka, even as it plans to expand its market.
According to Tushari, only four percent of Sri Lanka’s private sector is unionized. A 2018 report by WageIndicator Foundation put the figure at 18 percent.
“So there’s no trade union involvement, even as this tax is being discussed,” she says. “Forty-four percent of workers feel they will lose jobs in the future, but there’s no space to bargain with employers or the state. Employers have had meetings with the President and a working group was set up, but there’s no labor representation in those spaces.”
Crucial to the economy
The garment and textiles industry is Sri Lanka’s main source of foreign currency, accounting for 46 percent of export income and directly employing 350,000 people. The sector was valued at $5.92 billion in 2022 and was projected to reach $8 billion by 2025 through investments in the local supply chain. It has been key to easing the economic insecurity of a nation still reeling from its worst financial crisis in decades. But the threat of high tariffs by its top export market has introduced a new wave of economic anxiety in Sri Lanka.
In a statement issued shortly after Trump’s announcement of the new tariff rates, Sri Lanka’s Finance Ministry raised concerns about the South Asian country’s economic recovery, which remains fragile after the dollar shortage that led to a major financial crisis three years ago.
Journalist and political economist Shiran Illenperuma reckons that the new developments could trigger a cascading effect across Sri Lanka’s entire economy.
“If our exports become more uncompetitive, that’s going to put a strain on our foreign currency reserves—which in turn will affect our ability to service debt,” he says. “Major debt repayments are set to begin around 2027–2028, and Sri Lanka’s IMF debt restructuring program wasn’t really designed to absorb an external shock like this.
He adds that the current capacity utilization in factories is below the pre-pandemic levels and the country’s economic crisis between 2019 and 2024.
“From a long-term perspective, the industry was already struggling. Local companies had begun moving operations to East Africa—places like Kenya and Ethiopia. So, this is hitting the industry when it’s already at a low point, with a lot of uncertainty,” he says.
Everyone was just anxious to see what would happen,” says Joint Apparel Association Forum Secretary General Yohan Lawrence, describing the export sector’s immediate reaction to Trump’s tariff announcement in April. “There was a lot of uncertainty when the announcement came. There was a lot of hesitation on the part of the brands. They were saying things like, ‘Don’t proceed with the orders, we’ll wait and see where this goes’.”
He says that while the short pause brought in some reprieve, “even now, it’s still unclear what will happen after those 90 days, and that creates ongoing uncertainty” among the U.S. labels sourcing from Sri Lankan manufacturers.
The fate of Sri Lanka’s export industry will depend on how it compares to its regional neighbors once the tariffs come into effect after the pause, says Lawrence.
“The important thing for us is where Sri Lanka stands in relation to our competitors,” he notes. “If you look at countries like India, Pakistan, and Bangladesh, their tariff levels are lower than Sri Lanka’s, which creates a disadvantage.”
This puts Sri Lanka at a disadvantage, he says, and may prompt some businesses to turn to other exporters.
“Brands are asking themselves: how much should I allocate to Sri Lanka, and how much to Bangladesh, Vietnam, or elsewhere? That’s the real challenge. In such uncertain times, brands tend to commit as little as possible until they have a clearer picture of where things are headed,” he says.
No state protection for workers
For sure, though, the workers are already feeling the pinch. According to Tushari, anxiety has been rising, particularly among the country’s 350,000 garments and apparel workers—most of them women. She says that management spreads the message that workers are expendable because Bangladesh hits more production targets.
“They are told: ‘If you can’t hit this, you’re worthless’,” says Tushari.
“In 2020, when the crisis hit, factories shifted their exports to India or Jordan,” she recalls. “Sri Lankan workers were taken to those countries, too. So, this isn’t new to them. They know they can lose their jobs.”
Garment factories were set up as part of a government-led nation-building project after the 2009 end of the long-standing armed conflict between the government and the separatist Liberation Tigers of Tamil Eelam (LTTE). Colombo focused on reviving the economy by promoting the garment industry as a major export sector. As the industry expanded, it created jobs and played a significant role in Sri Lanka’s development, especially in its northern region.
“The government facilitated the entry of large corporations, allowing them to establish factories that employed 6,000 to 7,000 people,” says Madhulika Gunawardana, advocacy coordinator of Dabindu Collective. “However, today these workers operate without any form of government protection.”
Tushari says that garment factory workers in Kilinochchi – more than 340 kms north of Colombo – have had reduced workloads since last February. The Kilinochchi factories primarily have U.S. clients.
“We’ve seen weeks-long breaks being given to workers,” Tushari says, “which means they don’t get overtime and end up earning much less.”
This is happening across Sri Lanka, she clarifies, but Dabindu is highlighting Kilinochchi because the garment industry is the only source of formal employment for the women there.
“Garment factories have been their only steady income sources because climate change is impacting their agricultural work and their food security,” says Tushari. “So, (their) only form of formal income is shrinking.”
Rollercoaster revenues
Lawrence, whose association works closely with the government to support export growth, denies any industry wrongdoing against workers. Factories are operating as usual, he says, with everyone focused on getting orders out before the 90-day period ends.
“Right now, everybody has work, and I don’t think anyone is looking at laying people off,” Lawrence says. “Everybody’s quite busy, factories are full and people are working. Look at our export numbers, last month were 10 percent higher than previous months, so that argument kind of doesn’t stick with the facts.”
He doesn’t offer specific figures, however, and data available to the public are currently only up to April 2025.
According to the Sri Lanka Export Development Board, apparel and textile export revenues rose by 11.59 percent to nearly $1.5 billion in the first quarter of 2025, compared to the same period in 2024.
Data from the Sri Lanka Apparel Exporters Association reveal the sector’s rollercoaster performance from January to April this year, with export revenues at $437 million in January, $407.93 million in February, $467.07 million in March, and then $344.41million in April. These figures include exports to the United States, which reached a high of $171.79 million in March before dropping to $121.90 in April.
Observers say that exports to the United States may now be surging in anticipation of a worst-case scenario after July 9. Gunawardana says that some garment manufacturers are taking other measures in case of bad news ahead: Dabindu has already received reports of at least 10 workers having been asked to submit their voluntary resignations.
“This is their strategy,” says Gunawardana. “Because if they do fire them, then they have to give them compensation for termination. But instead of doing that, they asked the workers themselves to leave.”
Tushari says that the real issue isn’t whether or not Trump’s tariffs stay in place, but that workers are likely to be sacrificed and made to suffer pay cuts, loss of rights, and more.
“The government doesn’t respond to their needs,” she says. “It’s not just about foreign currency, but how you sustain humans and communities. That’s never in the picture.
“In our family, it’s just me and my husband who earn,” says Shalika, the garment factory worker who is a mother of two. “With what we make, we can barely manage food and daily expenses, let alone cover the costs of our children’s schooling. We’re already drowning in debt because of our home and vehicle loans. I don’t know how we’ll survive if things get worse.” ◉
Kanika Gupta is a journalist and documentary filmmaker from New Delhi. She reports on humanitarian issues and those related to human rights and women’s rights from South Asia.
