Urgent Reforms Needed to Safeguard $3 Billion Trade Ties
Sri Lanka’s $3 billion export trade with the United States — accounting for 25% of its total exports — faces severe disruption if proposed US tariffs come into effect, economists have cautioned. Experts warn that the looming measures could push production towards competitor nations such as India, Kenya, and Egypt, where tariff hikes would be less severe.
A group of prominent economists and policy analysts — including Anushan Kapilan, Daniel Alphonsus, Duvindi Illankoon, Mathisha Arangala, Raj Rajakulendran, Rehana Thowfeek, and Umesh Moramudali, along with K. Don Vimanga, Ravi Ratnasabapathy, Sarani Jayawardena, and Yolani Fernando — have sounded the alarm over the imminent risks.
In response, the government is working on a tariff reduction strategy aimed at safeguarding the country’s export sector. Analysts highlight that Sri Lanka’s import tariffs have remained among the highest globally for the past two decades — a stark contrast to the 1990s when the country boasted competitive rates and exports peaked globally.
“Successive failed tariff reforms have benefited select interests at the expense of broader economic growth,” industry experts noted. They strongly advocate for the elimination of para-tariffs, simplification of the tariff structure, and the urgent implementation of long-pending trade facilitation measures like the National Single Window system.
These reforms could significantly reduce business input costs, lower consumer prices, and provide greater monetary policy flexibility for the Central Bank. Economists argue that implementing these changes would also strengthen Sri Lanka’s hand in future US trade negotiations.
The crisis further underscores Sri Lanka’s long-standing lack of export diversification, with no major new manufactured or agricultural export products emerging since the 1980s. Experts call for immediate action to integrate into regional supply chains by signing FTAs with India, China, and ASEAN nations, and eventually joining the Regional Comprehensive Economic Partnership (RCEP).
Trade analysts also stress the need for fundamental reforms in labor, land, and energy markets to attract export-oriented foreign investment. They propose leveraging foreign capital for critical infrastructure projects such as industrial zones, logistics hubs, and energy generation to enhance competitiveness.
With growing global economic uncertainty, economists urge decisive reforms to boost Sri Lanka’s trade resilience. “This is not just about surviving the US tariff shock — it’s about fundamentally transforming our ability to compete on the international stage,” they concluded.
The government’s ability to respond swiftly and effectively will determine whether Sri Lanka can shield its vital US export market and position itself for long-term growth amid volatile global trade conditions.