Opinion
Trump tariffs and their effect on world trade and economy with particular reference to Sri Lanka – Part V
(Continued from yesterday)
Domestic Market Development
While Sri Lanka’s relatively small domestic market (22 million people) limits the potential for inward-focused development, there may be opportunities to reduce import dependence in certain sectors and develop stronger linkages between export industries and domestic suppliers. This could create more balanced growth and reduce vulnerability to external shocks.
Policies to support domestic market development might include,
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Import Substitution in Strategic Sectors: Targeted support for domestic production of essential goods and inputs to export industries, reducing dependency on imports.
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Strengthening Domestic Supply Chains: Developing stronger linkages between export-oriented firms and local suppliers to increase domestic value addition.
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Addressing Income Inequality: Policies that increase purchasing power among lower and middle-income Sri Lankans could expand the domestic market for locally produced goods and services.
Such approaches would need to avoid the pitfalls of earlier import substitution models that created inefficient, protected industries. The focus should be on developing competitive domestic capabilities rather than simply erecting barriers to imports.
Policy Recommendations
Based on the analysis of both short-term and longer-term strategies, several specific policy recommendations emerge for Sri Lanka,
Industrial Policy Reforms
Sri Lanka should develop a comprehensive industrial policy that goes beyond the current focus on export promotion to address structural vulnerabilities revealed by the tariff shock. This policy should,
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Identify priority sectors for diversification based on a realistic assessment of Sri Lanka’s competitive advantages and global market opportunities.
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Provide targeted support for research and development, skills training, and quality infrastructure in these priority sectors.
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Reform regulatory frameworks to reduce barriers to business formation, innovation, and growth.
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Develop specific strategies for upgrading within existing export sectors like textiles, helping firms move into higher-value activities.
Investment in Innovation and Skills
Human capital development represents a critical foundation for economic resilience and diversification. Sri Lanka should,
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Align education and training systems more closely with emerging economic opportunities, emphasizing technical skills, digital literacy, and innovation capabilities.
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Support university-industry collaboration to develop applied research relevant to Sri Lanka’s economic challenges.
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Facilitate knowledge transfer through diaspora engagement, international partnerships, and strategic foreign direct investment.
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Develop innovation hubs and incubators focused on priority sectors for diversification.
Sustainable Debt Management
The tariff shock highlights the importance of building greater resilience into Sri Lanka’s approach to external debt. Recommendations include,
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Advocating for reforms to international debt restructuring frameworks that would explicitly link repayment obligations to export performance, similar to the London Debt Agreement model.
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Developing contingency clauses in future debt agreements that would automatically adjust payment terms in response to external shocks beyond the country’s control.
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Prioritizing concessional financing over commercial borrowing where possible to reduce vulnerability to market sentiment.
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Building stronger foreign exchange reserves during periods of stability to provide buffers against future shocks.
Social Protection for Affected Workers
Finally, Sri Lanka must develop more robust systems to protect vulnerable workers during economic transitions. Recommendations include,
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Establishing a dedicated adjustment assistance program for workers displaced by trade shocks, providing income support, retraining, and job placement services.
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Developing community-based support initiatives in regions highly dependent on export industries.
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Engaging international partners to support these efforts through technical and financial assistance.
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Ensuring that economic diversification strategies explicitly address employment creation for workers with different skill profiles.
Implementing these recommendations would require significant political will, institutional capacity, and international support. However, the current crisis created by President Trump’s tariffs also presents an opportunity to address long-standing structural vulnerabilities and build a more resilient economic model for Sri Lanka’s future development, just like what Sri Lanka did post economic crisis, such as tax reforms, SOE reforms and cost reflective pricing.
CONCLUSION
The imposition of sweeping tariffs by the Trump administration represents a profound disruption to the global trading system with far-reaching consequences for economies around the world. As we have seen throughout this analysis, these tariffs are not merely technical adjustments to trade policy but potentially transformative shifts that challenge fundamental assumptions about economic development, international cooperation, and the distribution of benefits and costs in our interconnected global economy.
For Sri Lanka, the 44% tariff rate imposed on its exports to the United States threatens to undermine a fragile economic recovery and reverse hard-won progress following the devastating crisis of 2022. With the United States accounting for 23% of Sri Lanka’s exports and the textile industry, which employs 350,000 workers, particularly vulnerable to this trade shock, the human consequences could be severe. Projected losses of $300 million in annual export earnings not only threaten jobs and livelihoods but also raise serious concerns about Sri Lanka’s ability to service its external debt obligations, despite recent restructuring efforts.
Sri Lanka’s experience illuminates broader structural vulnerabilities in the global economic system. The export-led development model promoted by international financial institutions for decades has created deep dependencies on continued access to wealthy consumer markets, particularly the United States. When this access is suddenly restricted through unilateral policy decisions, developing countries bear disproportionate adjustment costs with limited capacity to cushion the impact. The international trade and financial architecture offer inadequate mechanisms to address such shocks, with debt sustainability frameworks failing to properly account for trade performance and multilateral institutions lacking effective tools to prevent or mitigate the damage.
This situation calls for both immediate crisis response and longer-term structural reforms. In the short term, Sri Lanka must pursue diplomatic engagement with the United States, provide targeted support to affected industries within its fiscal constraints, and implement emergency measures to protect vulnerable workers. Over the longer term, strategies for market and product diversification, value chain upgrading, regional integration, and domestic market development offer pathways to greater resilience, though none provides a quick or easy solution to the current challenge.
Beyond Sri Lanka’s specific circumstances, President Trump’s tariffs may accelerate broader shifts in global trade patterns. We may see increased regionalization of trade, a greater role for China as both market and investor for developing economies, production relocation to avoid tariffs, and renewed interest in South-South cooperation and domestic market development. These shifts could fundamentally reshape the global economic landscape in ways that create both risks and opportunities for developing countries.
The tariff shock also highlights the need for more fundamental reforms to the international economic system. A more equitable approach to trade and development would recognize the structural challenges facing developing economies and provide meaningful policy space for them to pursue diversification and resilience-building strategies. Debt sustainability frameworks should explicitly link repayment obligations to export performance, acknowledging the fundamental importance of trade capacity to debt service ability. And multilateral institutions should develop more effective mechanisms to prevent unilateral actions that disproportionately harm vulnerable economies.
For Sri Lanka specifically, this moment of crisis also presents an opportunity for reflection and reform. The country’s heavy dependence on a narrow range of exports to a small number of markets has created vulnerabilities that predate President Trump’s tariffs. A comprehensive strategy for economic diversification, encompassing both products and markets, could create greater resilience against future shocks while potentially opening new pathways for more inclusive and sustainable development.
Ultimately, the story of Trump’s tariffs and their impact on Sri Lanka reminds us that behind abstract economic policies and trade statistics lie real human lives and communities. The textile worker in a factory outside Colombo, the small business owner supplying packaging materials to exporters, the rural family dependent on remittances from a daughter employed in the garment industry, these are the people who will bear the true cost of these tariff policies. Their futures hang in the balance as global economic forces shaped by decisions in Washington ripple outward to distant shores.
As the international community responds to this disruption in global trade, we would do well to centre these human impacts in our analysis and policy responses. A truly equitable international economic system must not only facilitate the efficient exchange of goods and services but also ensure that the benefits of global integration and the costs of economic adjustment are distributed fairly between wealthy and developing nations. President Trump’s tariffs have exposed how far we remain from this ideal, and how urgently we need to work toward a more balanced and inclusive model of global economic cooperation.
Rethinking Trade Metrics: It’s the Current Account, Not Just the Trade Balance
While the Trump administration frames its tariff decisions around bilateral trade deficits in goods, that gives a very skewed picture. The true measure of how our economies are actually connected between nations is the current account, which includes not just the balance of goods, but also services, investment income, and transfer payments.
Take Sri Lanka, while it may appear to run a surplus in goods trade with the U.S., that surplus is more than offset by,
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Payments for U.S.-based tech and streaming services (Google, Netflix, Apple)
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Outbound tourism and overseas education costs
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Interest payments on sovereign debt owed to institutions like the IMF and World Bank, whose returns flow back to major shareholders, including the U.S.
This broader deficit in the current account illustrates that Sri Lanka is not exploiting the U.S., but rather taking part in a back-and-forth economic relationship that is already tilted toward the American economy.
Basing tariff policy solely on trade deficits in goods completely misses this bigger economic picture, and risks harming the very development partners whose growth would ultimately benefit the global economy, including the United States.
(Concluded)
(The writer served as the Minister of Justice, Finance and Foreign Affairs of Sri Lanka)
Disclaimer:
This article contains projections and scenario-based analysis based on current economic trends, policy statements, and historical behaviour patterns. While every effort has been made to ensure factual accuracy using publicly available data and established economic models, certain details, particularly regarding future policy decisions and their impacts, remain hypothetical. These projections are intended to inform discussion and analysis, not to predict outcomes with certainty.
by M. U. M. Ali Sabry
President’s Counsel
Opinion
Lakshman Balasuriya – simply a top-class human being
It is with deep sorrow that I share the passing of one of my dearests and most trusted friends of many years, Lakshman Balasuriya. He left us on Sunday morning, and with him went a part of my own life. The emptiness he leaves behind is immense, and I struggle to find words that can carry its weight.
Lakshman was not simply a friend. He was a brother to me. We shared a bond built on mutual respect, quiet understanding, and unwavering trust. These things are rare in life, and for that reason they are precious beyond measure. I try to remind myself that I was privileged to spend the final hours of his life with him, but even that thought cannot soften the ache of his sudden and significant absence.
Not too long ago, our families were on holiday together. Lakshman and Janine returned to Sri Lanka early. The rest of the holiday felt a bit empty without Lakshman’s daily presence. I cannot fathom how different life itself will be from now on.
He was gentle and a giant in every sense of the word. A deeply civilized man, refined in taste, gracious in manner, and extraordinarily humble. His humility was second to none, and yet it was never a weakness. It was strength, expressed through kindness, warmth, and dignity. He carried himself with quiet class and had a way of making everyone around him feel at ease.
Lakshman had a very dry, almost deadpan, sense of humor. It was the kind of humor that would catch you off guard, delivered with too straight a face to be certain he was joking, but it could lighten the darkest of conversations. He had a disdain for negativity of any kind. He preferred to look forward, to see possibilities rather than obstacles.
He was exceptionally meticulous and had a particular gift for identifying talent. Once he hired someone, he made sure they were cared for in unimaginable ways. He provided every resource needed for success, and then, with complete trust, granted them independence and autonomy. His staff were not simply employees to him. They were family. He took immense pride in them, and his forward-thinking optimism created an environment of extraordinary positivity and a passion to deliver results and do the right thing.
Lakshman was also a proud family man. He spoke often, and with great pride, about his children, grandchildren, nephews, and nieces. His joy in their achievements was boundless. He was a proud father, grandfather, and uncle, and his devotion to his family reflected the same loyalty he extended to his colleagues and friends.
Whether it was family, staff, or anyone he deemed deserving, Lakshman stood by them unconditionally in times of crisis. He would not let go until victory was secured. That was his way. He was a uniquely kind soul through and through.
Our bond was close. Whenever I arrived in Sri Lanka, it became an unspoken ritual that we would meet at least twice. The first would be on the day of my arrival, and then again on the day I left. It was our custom, and one I cherished deeply. We met regularly, and we spoke almost daily. He was simply a top-class human being. We were friends. We were brothers. His passing has devastated me.
Today I understood fully the true meaning of the phrase ‘priyehi vippaogo dukkho’ — (ප්රියෙහි විප්පයෝගෝ දුක්ඛෝපෝ) ‘separation from those who are beloved is sorrowful.’
My thoughts and prayers are with Janine, Amanthi, and Keshav during this time of profound loss. Lakshman leaves behind indelible memories, as well as a legacy of decency, loyalty, and quiet strength. All of us who were fortunate to know him will hold that legacy close to our hearts.
If Lakshman’s life could leave us with just one lesson, that lesson would be this. True greatness is not measured in titles or possessions, but in the way one treats others: with humility, with loyalty, with kindness that does not falter in times of crisis. Lakshman showed us that to stand by someone, to believe in them, and to lift them up when they falter, is the highest of callings, and it was a calling he never failed to honour.
Rest well, my dear friend.
Krishantha Prasad Cooray
Opinion
My friend Padmini is no more
It was so sudden!
I have known Padmini as a French student in the 70s. She was recognized at the Non Aligned Conference in 1976 by being recruited as a French interpreter. She was an active member at l’ Alliance Francaise and was able to associate with the Director/s in a manner that was closer than to many of us would venture.
She also knew astrology, did you know that?
She knew to dress fashionably. In later years, her walking stick was as fashionable as her dress!
She knew to cook and impressed the Colombo Hilton by winning first place or was runner-up at cookery competitions. She rarely spoke about such achievements but did so sometimes at the right moment.
My favourite times with her was when Padmini invites me with a group of others to many of her Cheese’n Wine get-togethers. There were always different cheeses in abundance, with a choice of rye, baguette or other fancy breads to complement the cheese. It was always a wonderful afternoon only possible at Padmini’s.
Her smile, her charm, and her warm friendship, I will miss. My sympathies go to her three children. Amal, Tamara and Aruni. May her memory live on with all her friends. As for me, she was very special.
Ramani Rajapakse
Opinion
Presidential authority in times of emergency: A contemporary appraisal – II
Keynote Address Delivered at the International Research Conference of the Faculty of Law, University of Colombo, on 12 December 2025.
(Continued from yesterday)
V. Usage Down the Ages
Empirical evidence during all epochs of history, and in a vast array of legal cultures, establishes without doubt the need for far-reaching executive powers during times of crisis.
The legal acumen of the Roman Republic did not recoil from conferment of even dictatorial powers on its principal executive officials—the two consuls—during periods of breakdown. They wielded life and death powers over Roman citizens, but the right balance was struck. Extraordinary authority was limited to the brief span of six months, and the appointing official could not select himself. Checks and balances assured success of the system: although 90 dictators were appointed under the Roman Republic during a period of 300 years, not one dictator attempted to perpetuate the system at the end of his tenure.
The English common law is certainly no exception to this tradition. The essence of the English doctrine is that the Executive has “an inherent constitutional authority to proclaim martial law when it deems there to be a public emergency, a proclamation that entitles the Executive to act as it sees fit to respond to the emergency” (Dyzenhaus).This power has been applied by the United Kingdom to her colonies, including Ceylon, where Governor Sir Robert Chalmers, for example, made ruthless use of it during the Sinhala-Muslim riots under the cloud of World War I.
In the United States, Congress has passed no fewer than 470 statutes granting authority to the President to use extraordinary powers during a declared state of national emergency. An egregious instance is Executive Order 9066 issued by President Roosevelt just two months after the Japanese attack on Pearl Harbour. This resulted in the mass incarceration of approximately 120,000 Japanese Americans from the western United States, over 70,000 of whom were American citizens(Amanda Tyler).
In the aftermath of 9/11, one of the gravest global emergencies in our time, American and British courts, for compelling reasons, showed marked solicitude for executive authority. A plurality of the Supreme Court of the United States held that the Congressional Resolution, Authorization for Use of Military Force, permitted the detention of enemy combatants, such power being recognized as “fundamental” and “a necessary and appropriate use of force” (Hamdi v. Rumsfeld). In the United Kingdom, in the first decision after 9/11, the House of Lords, grounding its decision in the separation of powers, held that it is for the Executive to decide what is in the interest of national security (The Belmarsh case).In doing so, the House of Lords had no hesitation in overruling the decision to the contrary by an administrative tribunal, the Special Immigration Appeals Commission.
VI. Imaginative Features of the Evolving Law
The limits of judicial review in this setting emerge clearly from impeccable precedents across the world. Legitimacy of the Proclamation of Emergency issued in Sri Lanka by the Acting President on 17 July 2022, assessed in light of these precedents, admits of no doubt.
The dominant test is that based on proportionality. The salient requirement is that the impugned measure should clearly realize or advance its underlying purpose, that “the use of such means would rationally lead to realization of the law’s purpose”(A. Barak). In terms of a comparative assessment of the harm inflicted on constitutional rights and the benefit accruing to the public interest, intervention by the Executive should come down heavily on the side of the latter, as opposed to the former(A.P. Brady).
The basis of justification is that the risk of harm sought to be averted should be very high, an overriding public interest being placed at stake in a situation where the outcome is perilously uncertain (J. Zander).Gravity of the risk and the extent of impending harm are the governing factors.
Evaluated against these criteria, the Sri Lankan Emergency Proclamation of 17 July 2022 passes the test with ease. In the backdrop of the nerve centres of the Executive Administration having fallen to the control of a violent mob, and the attempted extension of their initiative to the precincts of Parliament, where a crucial vote was scheduled within a matter of days for the election of the President of the Republic, in keeping with constitutional procedure, the Proclamation clearly served the purpose of ensuring unimpeded access to Parliament for legislators to perform their constitutional duty. Prevention of this by unlawful force would have presaged nothing less than the collapse of constitutionalism and the descent of the country into anarchy.
While recourse to the proportionality test would inevitably yield this result, it is worth noting a further refinement in the developing law. This has taken the form of modifying the criterion of proportionality by the application of a “precautionary principle” in suitable contexts.
The effect of this principle, now fortified by reliable antecedents, is “to favour the governmental objective (to mitigate or avert a crisis) over fundamental rights” (Ondrejek and Horak). This approach, militating against the postulate, in dubio pro libertate, has been described as “a rational and prudent response in the face of uncertainty”(Renn).
The precautionary principle, as a feature of contemporary jurisprudence, has its origin in international environmental law. Its substance is captured in the Rio Declaration on Environment and Development, 1992, which states: “In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation”. Lack of epistemic certainty, then, must not forestall preventive action against grave damage. This principle has currently received acceptance outside the domain of environmental law as the anchor of a pragmatic mediating technique, of particular value in our time.
Applied to the Sri Lankan situation, it should conclusively govern the outcome, in that pre-emptive action in the face of impending disruption of a crucial meeting of Parliament is obviously a measure of prudence.
VII. A Realistic Assessment
The ratio decidendi of the majority decision of the Supreme Court is that, even after the President had reached a proper conclusion about the existence of a state of public emergency, he is still compulsorily required to consider whether other options are available to deal adequately with the crisis. This finding is demonstrably at variance with established authority.
The view has been persuasively taken that “There is usually more than one decision compatible with the complainant’s rights,
and it is for the public body rather than the court to choose between them”(T. R. S. Allen). Thus, “when there is scope for different answers or approaches, it is right that the court accept the solution favoured by the public authority”. Sir Thomas Bingham (as he then was) has referred in this context to “the range of options open to a reasonable decision maker”(R v. Ministry of Defence, ex parte Smith).Accordingly, there should not be “too narrow a space for the discretion of the primary decision maker”(Ondrejek and Horak).
The Supreme Court of the United States has declared: “It is no part of the function of a court to determine which one of two modes was likely to be the most effective for the protection of the public”(Jacobson v. Massachusetts). The Court spelt out the rationale for its ruling: the contrary decision could well lead to “disorder and anarchy”.
In a well-known ruling in 2018, in a case involving a travel ban imposed by President Trump, the Supreme Court observed: “Whether the President’s chosen method of addressing perceived risks is justified from a policy perspective, is irrelevant”(Trump v. Hawaii).The Court therefore refused the plaintiffs’ request for “a searching inquiry” on the ground of “the deference traditionally accorded to the President in the sphere of national security”.
This approach has cogency, for at least four compelling reasons.
First, the need for expeditious intervention is paramount. This is tied to the essential “reassurance function” of the Executive. “The government must act visibly and decisively to demonstrate to its terrorized citizens that the breach was only temporary, and that it is taking aggressive action to contain the crisis”(Ackerman).Speedy action on the spur of the moment, in an atmosphere far removed from one conducive to meticulous weighing of alternatives ex post facto, in a relaxed and unhurried setting, is the critical need.
Second, the consequences of delay should be evaluated against the prudence of prompt action. The reflection by Obeyesekere J. carries conviction: “In the event the Acting President did not take decisive steps, and further elected representatives were murdered, or Parliament was stormed, this Court may have had to consider whether there was a dereliction of duty in failing to act on the advice of pivotal officers responsible for maintaining law and order”. This was a situation in which the Minister of Public Security, the Secretary to the Ministry of Defence, and the Inspector General of Police had all recommended to the Acting President the declaration of a State of Emergency.
Third, in this instance, the effect of Presidential intervention was required only for a strikingly brief duration—until Parliament met within two days. Professor Bruce Ackerman of Yale University has offered the sapient comment: “The Executive should be given the power to act unilaterally only for the briefest period—long enough for the Legislature to convene and consider the matter, but no longer”.
Fourth, the rigidly circumscribed scope of judicial review in this setting is indicated by the narrow window for application of the Wednesbury test of reasonableness. In the evolving law, the impugned action is no longer required to be “suitable”, as a matter of judicial proof. All that is required is that it should “not be manifestly unsuitable”. This involves, from a practical standpoint, shifting of the burden of proof from the decision maker to those assailing the decision; and the threshold of proof is dauntingly exacting. The preferred principle in modern law is that “the courts should not quash or declare illegal any emergency measure or decision unless it is very likely(based on the already available data and evidence) that it cannot contribute to the legitimate aim in any way”(Ondrejek and Horak).
The Supreme Court of India has determined that there is no warrant for judicial intervention unless it is clear from the material on record that there is “absolutely no justification” for the Proclamation (Bhagvati J in Minerva Mills).Stringency of the test for availability of judicial review is laid bare by the example given by Bhagwati J—the Chief Minister of the state in question being below five feet in height(State of Rajasthan v. Union of India).This bears comparison with the famous illustration of the red-headed schoolteacher in the Wednesbury case. The trend, then, is unmistakably hostile to expansion of judicial review on this ground.
In our own country, this predisposition is reinforced by a firmly entrenched constitutional norm. A foundational principle of our public law is the vesting of judicial power, not in the courts but in Parliament, which exercises judicial power through the instrument of the courts. This is made explicit by Article 4(c) of the Constitution which provides: “The judicial power of the People shall be exercised by Parliament through courts, tribunals and institutions created and established, or recognized by the Constitution, or created and established by law, except in regard to matters relating to the privileges, immunities and powers of Parliament and of its members, wherein the judicial power of the People may be exercised directly by Parliament according to law”.
VIII. Conclusion
One of the most influential academic contributions to this subject in our time is the paper recently published in the University of Queensland Journal by Richard Ekins, Associate Professor of Law in the University of Oxford, and Graham Gee, Professor of Public Law in the University of Sheffield. The view is there articulated with exceptional force that there is reason to entertain deep suspicion regarding “a vague freewheeling judicial power”, which is seen at bottom as “antithetical to the rule of law”. This has been trenchantly denounced as “a lawless grab for power, unrooted in our constitutional tradition”.
The overarching problem is one of legitimacy. It should certainly give us pause that “this dangerous stretch of legal technique” carries with it the risk of displacing the proper exercise of political accountability and, in doing so, compromising basic constitutional principle.
This kind of judicial overreach has many undesirable consequences beyond the crisp question of the legality of the declaration of a state of emergency in 2022, including:
a) Traducing constitutional tradition;
b) Subverting the specific model of separation of powers reflected in our Constitution;
c) Undermining the established rule of interpretation that the courts construe the law from the face of the statutory and/or constitutional text, including due respect for ouster clauses;
d) Eroding established principles of public law in respect of the legality of executive or administrative actions; and
e) Inappropriately invoking doctrines such as those relating to ‘public trust’ and ‘just and equitable’ remedies to justify judicial overreach when those doctrines are there to ensure the common good and institutional role morality.
By Professor G. L. Peiris ✍️
D. Phil. (Oxford), Ph. D. (Sri Lanka);
Rhodes Scholar, Quondam Visiting Fellow of the Universities of Oxford, Cambridge and London;
Former Vice-Chancellor and Emeritus Professor of Law of the University of Colombo.
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