Sri Lanka’s apparel industry is facing renewed pressure amid falling US retail sales and looming tariff hikes that could derail exports to one of its key markets. The latest data from the US National Retail Federation (NRF) reveals a sharp slowdown in consumer spending on clothing in June 2025, signaling potential trouble for exporters like Sri Lanka.
According to the CNBC/NRF Retail Monitor, US sales at clothing and accessory stores dropped 0.22% month-on-month in June after seasonal adjustments—marking the first monthly decline since February. While unadjusted year-on-year sales grew by 2.71%, this was still a slowdown compared to the 3.21% rise in May, underscoring weakening consumer demand.
The US retail sector, already grappling with economic uncertainty, is bracing for further headwinds from trade tensions. NRF President Matthew Shay pointed out that although consumers still have the ability to spend, the overall economic momentum is slowing. “Spending was down across almost all sectors,” he noted, warning that unresolved trade policies were acting as a major drag despite legislative measures like the “Big Beautiful Bill” aimed at stimulating growth.
For Sri Lanka’s apparel industry—which relies heavily on the US market for its export income—this downturn comes at a critical juncture. The situation is further exacerbated by US President Donald Trump’s renewed tariff threats. Trump has announced new duties of up to 30% on imports from Mexico and the EU beginning August 1, 2025. In addition, over 20 other countries, including key US trading partners like Japan, South Korea, and South Africa, have received notices about potential tariff increases of up to 40%, unless new bilateral agreements are reached.
While Sri Lanka is not yet directly named in the tariff list, trade analysts warn that unless swift diplomatic and trade policy action is taken, the country’s apparel exports could soon be subject to similar treatment. If such tariffs are imposed, the already struggling apparel sector could see export earnings drop significantly, with estimates pointing to a potential 30% or more decline.
Industry stakeholders are urging the Sri Lankan government to immediately engage with US trade officials and explore policy measures to secure tariff exemptions or new trade agreements. With apparel making up over 40% of Sri Lanka’s total export revenue, any prolonged disruption in the US market could have far-reaching economic implications.
As the global retail environment becomes increasingly volatile, Sri Lanka’s export strategy needs urgent recalibration to safeguard one of its most vital sectors from escalating geopolitical risks.
