Turning crisis into catalyst: Building Sri Lanka's resilience amid global trade war

AS the world spirals into deeper trade conflicts, with tariff battles and geopolitical rifts widening, Sri Lanka finds itself at a perilous crossroads. Small, import-reliant, and economically fragile, we are especially exposed to the tremors of global instability. In a storm whipped up by superpowers, our modest vessel risks capsizing—unless we act, and act fast.

- BY CHULA GOONASEKERA, BERNARD FERNANDO, GRATIAN PEIRIS, AND SHEHAN MALAKA GAMAGE ON BEHALF OF THE LEADS FORUM

Our vulnerability is not new. Years of debt accumulation, a narrow export base, and limited domestic production have left us dangerously dependent on foreign exchange. With looming loan repayments by 2028 and fresh memories of market scandals, complacency is no longer an option. Resilience must become a national mission, not a slogan.

The sharp rise in global tariffs is at the heart of today’s crisis. The United States, a key trading partner absorbing 23% of our exports, has imposed a 34% reciprocal tariff, citing alleged unfair trade practices, alongside a sweeping 10% ad valorem tariff on all imports. Although the harsher penalties are temporarily suspended, the warning is clear: our economy stands in the firing line. The stakes are enormous. In 2024, trade between Sri Lanka and the US totalled $3.4 billion. Our prized apparel industry, respected worldwide for ethical manufacturing, faces new hurdles. Key exports—from rubber goods to coconut products—are equally imperilled. Should the full force of tariffs hit, we risk job losses, declining industrial output, and severe revenue shocks. The US market is too vital to lose, but our current vulnerabilities leave us few defences.

Yet within this crisis lies a rare opportunity. Tariffs are not just threats but urgent reminders to reform, diversify, and fortify. Sri Lanka must move from reactive firefighting to a proactive strategy, turning these challenges into catalysts for long-overdue transformation.