## Apparel Sector Q1 2026: Navigating Headwinds via Strategic Policy 📈

Sri Lanka’s apparel & textiles exports faced a challenging Q1 2026, with an overall 8% decline YoY. While global demand softened, specific market resilience and policy windows offer a pathway for recovery. Performance Summary (Q1 2026) • Overall Exports: Down 8% (Jan: -3%, Feb: -11%, March: -11%). • Operating Costs: Monthly expenses rose by US$ 3 Mn due to high fuel and electricity prices. • US Market: Exports fell 8%; remains the top buyer (40% share). • EU Market: Exports declined 8%, with Italy and Germany remaining stable. • India: Notable 10% growth, signaling strong regional demand. Key Market Insights • USA: A temporary 10% duty under Section 122 provides a 150-day window for diplomatic engagement. Section 301 investigations offer a platform to showcase Sri Lanka's superior labor standards. • Europe: Focus remains on securing GSP+ renewal beyond 2027 to maintain duty-free access. • United Kingdom: Positive traction in womenswear and school-wear under the Developing Countries Trading Scheme. Strategic Action Plan • Energy Reform: JAAF is pushing for power wheeling and renewable energy to offset rising fossil fuel costs. • Trade Agreements: Urgency to revise the ISFTA 8-million piece cap with India and finalize the ETCA to unlock high-growth potential. • Competitiveness: Ensuring tariff parity with global competitors is essential to protecting margins for smaller manufacturers. _Note: Based on provisional Q1 data provided by the Joint Apparel Association Forum (JAAF)._