Tea exporters urge tariff-free access to US market

The Tea Exporters Association of Sri Lanka (TEA) has raised concerns over the recently imposed reciprocal tariffs by the US, warning that the country’s lucrative tea exports to the US market could face serious setbacks unless the issue is resolved within the 90-day grace period. 

The US is an important tea market and rank as the second largest buyer of tea in the world in terms of value of tea imports. As per available information it has imported over $ 500 million worth of tea last year. 

In a statement issued, the TEA pointed out that although USA is a predominantly an iced tea market with a share of 80 % of the domestic tea consumption, Sri Lanka with 20% of share, holds a significant position in the hot tea segment of the US tea market. Sri Lanka exported a volume of 6.4 million kg of tea to US at the value of $ 45 million last year which is an increase of 22 % in volume and 11% in value over the exports in 2023. 

Further they noted that it is one of the most valuable markets for export of value-added tea as 65 % of the volume of tea exports to US goes in value added form of tea packets, tea bags, instant tea etc. The average FOB price of tea exported to US is $ 7 per kg compared to the national average of $ 5.83 per kg recorded for 2024.

As of 11 April 2025, a volume of 296,016 kg of tea valued at $ 3,242,352 (over $ 3.24 million) shipped from Sri Lanka prior to the announcement of the US reciprocal tariff were on their way to US (on water) while another volume of 21,359 kg of tea valued at $ 479,649 were in USA ports awaiting clearance. 

As revealed by the members of TEA confirmed orders of 225,970 kg valued at $ 3,144,368 had been suspended by the US buyers soon after the announcement of reciprocal tariffs. However, the latest reports indicate that all tea shipments in USA ports are now being cleared by the US buyers by paying the 10% import duty. The trade sources also indicate that US buyers are planning to stock up tea and coffee items before the expiry of 90 days and suspended orders are also gradually being restored giving some relief to the local tea export companies.

Sri Lanka competes with India, Kenya, Vietnam, Indonesia etc. for a share in the US hot tea segment while supplying some tea to the iced tea market segment as well. The leading RTD brand in US uses the Ceylon Tea as its main ingredient. Although the suspension of reciprocal tariff for 90 days and placing all countries at 10 % import duty has reduced the initial worries to some extent, the tea export companies are concerned about the future of tea exports to USA if the tariff issue is not resolved before the end of 90 days. 

Since India (26%) and Kenya (10%) were imposed with lower tariffs than Sri Lanka (44 %) by US administration, reverting to previously announced high tariff may encourage US buyers to source more tea from India and Kenya at the expense of Sri Lanka.

It will be difficult for the Sri Lanka tea trade to find another market for 4 million kg of value-added tea at a higher FOB price in the short term if Sri Lanka loses the US tea market. Any reduction in orders from US buyers will affect the tea export revenue target of $ 1.5 billion set for 2025 and also the income of tea producers including the tea smallholder farmers. Since UAE (Dubai) was subject to only 10 % tariff under the US reciprocal tariff, some of the US tea businesses losing to Dubai also cannot be ruled out if Sri Lanka is unable to resolve the tariff issue within the 90 days’ period.

Tariff free access for the future of tea industry

In summary, considering the following, we request the lowest tariff or even tariff free access to the US tea market for the following key reasons;

1) Over 2 million or 10% of Sri Lanka’s population at the lowest level depend the tea exports income directly.

2) Tea is considered a basic food commodity globally and supports the livelihoods of many communities.

3) US is the second largest market in the world for tea in value terms and the fastest growing market for value added tea with a 22% annual growth recorded last year.

4) Sri Lanka has 20% market share in the US Hot Tea market segment and exports to the US is over 65% in value added form – which is critical for developing value added exports for Sri Lanka.

5) The total value that causes the trade deficit by tea is insignificant – but the impact of tariff on a large part of the population can be disastrous.