Sri Lanka’s apparel sector enters the final quarter of 2025 navigating one of its most precarious phases in years, as the industry contends with a 20 percent U.S. tariff, uncertainty surrounding the EU’s pending GSP+ renewal, and shifting global consumer demand.
Despite these headwinds, October’s export performance remained broadly flat—declining just 0.05 percent year-on-yearsupported largely by strong demand from Europe.
Data shows that exports to the European Union surged 12.53 percent in October, cushioning declines in key destinations such as the United States (-1.92%), the United Kingdom (-11.99%), and other markets (-9.84%).
The EU’s strong pull is especially significant given that access to GSP+which provides duty-free entry for most apparel categories—remains uncertain. Any lapse could trigger cost escalations, disrupt pricing structures, and undermine Sri Lanka’s competitiveness against regional rivals like Bangladesh, Vietnam, and Cambodia.
For the first ten months of 2025, the picture is firmer. Cumulative apparel exports grew 6.12 percent, driven by a 14.05 percent spike in EU-bound shipments. Exports to the U.S. expanded 1.37 percent, while the U.K. and other markets recorded modest increases of 0.98 percent and 8.31 percent respectively. Yet exporters warn that these improvements mask deepening structural vulnerabilities.
The Joint Apparel Association Forum (JAAF) notes that the sector’s ability to maintain stability reflects resilience and sustained investment, but industry insiders caution that growth is increasingly fragile. With the U.S. tariff hike already eroding margins, many manufacturers are struggling to compete with tariff-advantaged suppliers.
Several factories report that American buyers are pressing for price reductions or shifting orders to countries with preferential access.
Adding to the pressure is the EU’s still-pending decision on the extension of GSP+, expected in early 2026. If Sri Lanka loses the concession, apparel entering the EU could face tariffs ranging from 9 to 12 percent—an increase that exporters say would “wipe out the margin advantage” that currently sustains European orders.
Monthly export earnings reflect the volatility. After peaking at USD 479.14 million in August, exports fell to USD 403.01 million in September before edging up to USD 406.14 million in October, suggesting that recovery is stabilizing but far from entrenched.
The data underscores a sector caught in a tense global transition. Diversification efforts are improving exposure to non-traditional markets, while European demand continues to provide a buffer. But without stronger policy support, swift diplomacy on U.S. market access, and proactive engagement with Brussels on GSP+, Sri Lanka risks entering 2026 with weakened competitiveness.
The apparel industry remains one of the country’s largest export earners—but its resilience is being tested. Its future now hinges less on seasonal orders and more on decisive trade strategy from the government in the months ahead.
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