The trade relationship between the United States and Sri Lanka reached approximately $3.4 billion in 2024. The U.S. imported about $3.0 billion in goods from Sri Lanka while exporting $368.2 million, resulting in a trade deficit of $2.6 billion favoring Sri Lanka. Sri Lanka’s largest exports to the U.S. come from the apparel sector, accounting for over 70% of its exports in 2024. Other exports include tea, rubber, and fish. The U.S. was the biggest market for Sri Lankan exports, making up 23% of the country’s total merchandise exports in 2024.

Sri Lanka’s Export Focus

This data shows a strong push from Sri Lanka to export goods to the United States, mainly led by its apparel industry. Over two-thirds of the goods crossing the Atlantic are garments, indicating a reliance on one sector. The trade deficit of $2.6 billion in Sri Lanka’s favor is notable, especially since the U.S. economy is much larger. This highlights an unbalanced trade flow, with imports from Sri Lanka greatly outpacing exports from the U.S. With the U.S. consuming nearly a quarter of Sri Lanka’s total merchandise exports in 2024, it underscores that Colombo remains closely tied to American consumer demands. In addition to textiles and garments, smaller amounts of tea, rubber, and seafood are also exported. This variety suggests a somewhat diversified export base, but the focus on cotton and synthetic knitwear remains strong. For those tracking currency markets, the steady flow of goods from Sri Lanka—especially in its main sector—could help FX participants analyze rupee-linked forwards or hedging strategies. This trade imbalance may also shape expectations for companies that rely on textile and apparel costs in the U.S. Reliable trade numbers could lead to more stable pricing futures. Bond markets and swap curves might not react immediately to this trade data, but it’s wise to pay attention to apparel inventory numbers from the U.S. and freight reports in the coming weeks. If wholesalers are depleting their textile stocks faster than they can replenish them, it could signal changes in supply chain dynamics and impact interest rate-linked contracts.

Impact on Trading Strategies

On the trading side, equity derivative positions in apparel-focused indices or retail companies may require careful oversight. Analysts from Wilson recently noted that stable apparel trade leads to predictable margins for large U.S. retailers, especially with stable input costs like cotton. This predictability is vital for options traders focusing on volatility strategies around earnings seasons. While we can’t predict fixed timelines just yet, we should stay aware of any tariff discussions or geopolitical events between the two countries, as these could quickly affect short-term contracts. The current trade stability provides us with a solid base, but sentiment can change if policymakers alter their positions. It’s crucial to monitor developments weekly, especially through customs reports, port delays, or changes in seasonal spending in the U.S. This is important because no single data point will suddenly influence the markets, but collectively, they shape the story behind the value in spread positions. Finally, with the U.S. importing seven times more from Sri Lanka than it exports, there is long-term pressure on dollar outflows. We should watch for any strains in this area, as sustained imbalances can challenge either central bank’s ability to ensure long-term currency stability. Trading strategies involving cross-currency swaps might benefit from adjusting collateral models if these pressures increase again. Create your live VT Markets account and start trading now.

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