In early July, Sri Lanka published a government gazette banning imports of goods produced using forced labor. The move was presented as a principled stand against modern slavery. In reality, it was a tariff survival play, and one that may carry a serious diplomatic cost with Beijing.
The background is straightforward. In June, Washington announced that countries failing to prohibit forced labor imports would face heavy tariffs. Sri Lanka sends roughly 25 percent of its total exports to the United States : nearly $2 billion a year in apparel alone. It could not afford the punitive bracket. By adopting the ban, Colombo secured a 10 percent tariff rate instead of 12.5 percent. Seventeen other economies, including Canada, India, and Mexico, did the same.
On paper, the logic is simple. Ravi Karunanayake, a former finance and foreign minister, noted that there is no evidence that Sri Lanka imports anything from countries that use forced labor, and that Trump has made tariffs the centerpiece of his foreign policy. The Joint Apparel Association Forum said that even a narrow tariff difference could mean the difference between winning and losing an order to a rival sourcing destination. Sri Lanka’s apparel sector earned $4.9 billion in 2025, with $1.96 billion coming from the US market.
But the issue is not really about forced labor. It is about China.
The US Trade Representative’s policy specifically targets cotton from China’s Xinjiang region, alleging it is picked using coerced minority labor. Sri Lanka’s gazette implicitly endorses that narrative : and Beijing notices these things. China is Sri Lanka’s leading trade partner, its largest investor, and its biggest creditor. The Sri Lankan apparel sector imports many of its inputs from Chinese factories. By issuing the ban, Colombo has signaled to Beijing that it is willing to comply with US demands that single out China.
The irony is that the forced labor claims sit uneasily against the facts. China is the world’s most automated manufacturing economy : it installed 54 percent of all industrial robots deployed worldwide in 2024. In Xinjiang’s cotton fields, over 90 percent of the harvest was machine-picked by 2025, up from just 5 percent in 1990. Overall mechanization in cotton farming exceeded 97 percent last year. Chinese labor is no longer cheap; wages have risen sharply over the past decade. The idea that US industry cannot compete because of Chinese forced labor is, at best, a convenient story.
One analyst put it as an analogy: imagine having two powerful friends you cannot afford to lose. One threatens to punish you unless you publicly denounce the other for something you know the other did not do. You comply because you depend on that friend. But now the other friend is watching.
Sri Lanka’s position is not unique. Across Asia and the developing world, countries are being forced to pick sides in the US-China trade war, and the space for genuine neutrality is shrinking. For Colombo, the calculation may be that a 2.5 percent tariff discount is worth a diplomatic bruise with Beijing. But debts have a way of coming due, and China holds most of Sri Lanka’s paper.