US Tariffs Could Lead To Trade Diversions, says CBSL Chief

COLOMBO (News 1st); The Governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe provided a nuanced analysis of the potential ramifications of evolving US trade policies on Sri Lanka's economy.

Responding to inquiries about the Central Bank's assessment of US tariffs at various levels (10%, 20%, 25%), Dr. Weerasinghe offered a detailed overview of the current landscape.

"We have conducted some studies and tried to understand the potential impacts. However, it is still too early to make definitive assessments as the situation is evolving, and the specifics of the US tariffs, including the rates and targeted countries, remain uncertain," Dr. Weerasinghe explained.

He highlighted that Sri Lanka's export market, particularly the apparel sector, which generates approximately $2 billion annually, has a favorable trade balance with the US. Despite this, Sri Lanka's market access is relatively small compared to countries like Mexico, China, and Canada.

Dr. Weerasinghe underscored the importance of vigilant monitoring, noting that any potential impact would hinge on the US administration's policies and whether higher tariffs on certain countries would lead to trade diversions.

"There could be diversion from those countries. Supply orders may come here, can go to Bangladesh, or can go to Vietnam," said the Central Bank Governor.

The Governor reaffirmed the Central Bank's commitment to closely observing these developments to ensure informed and timely policy responses, emphasizing the need for adaptability in the face of global economic uncertainties.

"Our primary concern is whether external demand will be affected. Currently, our exporters' order books for the first six months are nearly full. The critical question is whether new orders will continue to flow in the second half of the year," he added.