Trade

Sri Lanka must be vigilant to avoid higher US tariff risks, educate exporters: IPS

Friday May 16, 2025 11:31 am

ECONOMYNEXT – Sri Lanka needs to be vigilant and follow the US CBP guidance to avoid higher tariffs due to rules of origin, the Institute of Policy Studies has said.

“If a different country is identified as the country of origin, Sri Lanka must pay the tariff rate applied to that particular country,” an IPS paper by Asanka Wijesinghe said.

“Irrespective of the outcome of negotiations on the 44% reciprocal tariffs, the Section 232 tariffs, reporting requirements, and rules of origin complexities will prevail.”

“The country of origin of steel and aluminium used in derivative products should be declared to avoid the 200% tariff imposed for aluminium and steel from Russia.

“Thus, reporting can be a technically challenging and costly task for exporters.”

Necessary technical assistance should be provided to Sri Lanka’s exporters to minimise the tariff cost under the current US trade policy regime, Wijesinghe said.

He added that although the “reciprocal tariff” grabbed attention, US trade policy under the second Trump administration is more complex.

“For Sri Lanka, as calculated using 2024 data, 95.6% of US imports are subject to reciprocal tariffs, with the 90-day pause, standing currently as a 10% global tariff.”

The full statement is reproduced below:

Going Beyond the US Reciprocal Tariffs: Sri Lanka’s Exposure to the Tariffs and Exemptions
Asanka Wijesinghe

The United States’ (US) proclamation of “reciprocal tariffs” dealt a blow to the global trade system based on the World Trade Organisation (WTO) principles. With the individualised tariff rates, the US has discarded non-discrimination in the Most-Favoured-Nation (MFN) tariff structure. The “reciprocal tariff” rate does not show any reciprocity but rather a calculation hypothesised to drive a bilateral trade deficit to zero.

Although the “reciprocal tariff” grabbed attention, US trade policy under the second Trump administration is more complex. Section 232 of the US Trade Expansion Act of 1962 is being used to target key sectors like steel, aluminium, and auto parts. In addition, investigations are ongoing to determine tariffs for copper, critical minerals, pharmaceuticals, and lumber.

For Sri Lanka, as calculated using 2024 data, 95.6% of US imports are subject to reciprocal tariffs, with the 90-day pause, standing currently as a 10% global tariff. In addition, 4.2% of imports from Sri Lanka are subject to the tariffs on steel, aluminium, and auto parts imposed under Section 232. However, 0.2% of Sri Lanka’s imports are exempted from the new tariff measures. These exemptions were made by issuing Annexe-II of the US Executive Order on the reciprocal tariffs and a notice issued by the US Customs and Border Protection (CBP) on April 12.

Figure 1: Exposure of Sri Lanka to various trade policy changes of the US

Source: Author’s calculations.

Sri Lanka’s Exposure to Section 232 Tariffs: Steel, Aluminium and Auto Components Tariffs

In 2018, under the first Trump administration, the US imposed a 25% tariff on steel and a 10% tariff on aluminium imported from all trade partners under Section 232 tariffs.

On March 12, 2025, the US expanded the 2018 Section 232, increasing the aluminium tariff to 25%, removing all existing exemptions, and adding more derivative products which use steel and aluminium as components. For example, a keg is an aluminium derivative product. When steel and aluminium imports are expensive due to tariffs, domestic producers are no longer competitive in the production of derivatives such as the keg in the earlier example. This leads to lobbying for cascading protectionist tariffs on imported derivatives. Thus, cascading protectionism means that when a raw material is subject to tariffs in the downstream, the final good becomes less competitive, forcing producers to demand tariff protection for the final goods.

Sri Lanka’s exports will be subjected to an additional 25 per cent of the value of the steel and aluminium content under the 2025 Section 232 tariffs. The newly added aluminium derivative products account for USD 28.5 Mn in US imports from Sri Lanka, across 27 products. There are USD 80.78 Mn imports under 20 products from Sri Lanka, which are categorised as steel derivatives under the Section 232 Steel and Aluminium tariff proclamation by the US.

New challenges for exporters

One main challenge of the new US tariff structure is the additional reporting requirements for exporters. Notably, the stipulated tariffs will be calculated for the steel or aluminium value of the products, which are exempt from reciprocal tariffs. For example, machinery parts made of steel will be subject to 25% additional steel tariffs, but they are not subject to 10% or 44% reciprocal tariffs. If the machinery parts contain 60% steel value, then the 25% tariff is applied to the 60% steel value. The remaining 40% is subject to the relevant tariff line specified for machinery parts. The exporters need to report on the aluminium and steel content by value, and failure to do so will result in an additional 25% tariff on the whole product’s value.

Lack of information on the steel and aluminium content makes reporting challenging for exporters. Although tariff calculations need the aluminium or steel value, that information is not given in publicly available data; the calculation of tariff increases needs assumptions. Assuming 25% of product value, the fabricated metal sector sees a weighted average tariff increasing to 6.7% from the base tariff rate of 0.6%. The Section 232 products are not subject to reciprocal tariffs. It explains the stable weighted average tariff rate for the fabricated metal sector, even after applying a 10% global tariff and 44% reciprocal tariffs in Figure 2.

Figure 2: Trade-weighted tariff change for fabricated metal products and motor vehicles sectors

Source: Author’s calculations.

The US also announced tariffs on automobiles and parts on March 26 and enacted auto tariffs on April 03. However, the tariffs on automobile parts were delayed to a future date not later than May 03, 2025. The auto components account for 0.5% or USD 10.9 Mn exports by Sri Lanka. New pneumatic radial tyres, non-cellular vulcanised rubber articles, and electric control apparatus are among the products subject to auto component tariffs. As shown in Figure 2, the effective weighted average tariff for motor vehicle sector exports from Sri Lanka to the US will increase to 19.66% on May 03.

Exemptions from some additional tariffs have little implications for Sri Lanka. The US exempts certain products necessary for the US domestic industries or those that are subject to Section 232 tariffs. Ten products exported by Sri Lanka are exempted from the reciprocal tariffs, including natural rubber and natural graphite (Figure 3). Natural graphite is an essential component and critical mineral in EV battery manufacturing. On April 12, the US Customs and Border Protection (CBP) released another list of exemptions, primarily composed of electronic equipment. The exemptions exclude products from the direct effect of additional tariffs. However, there is no added advantage from this exclusion, as all countries receive the exemptions, eliminating any relative price advantage for Sri Lanka.

Figure 3: US tariff exemptions and their implications on Sri Lanka

Note: These exemptions were made by issuing Annexe-II of the US Executive Order on the reciprocal tariffs and a notice issued by the US Customs and Border Protection on April 12.

Source: Author’s calculations

Reciprocal Tariffs: Effective Tariff Rates for Sri Lanka

As a 44% “reciprocal tariff” will not be imposed until July, the current effective tariff rate is the MFN rate plus 10%, which applies to 95.6% of Sri Lanka’s exports to the US, worth USD 2.93 Bn. Accordingly, since April 05, the apparel sector has had a 26.65% average tariff (Figure 4). The base MFN tariff average for wearing apparel was 16.65%.

Sectors such as rubber, other manufacturing products, including gems and precious stones, and food preparations experience the most significant relative tariff hikes. These sectors had tariff rates that were less than 2% before April 05. Notably, 37.7% of Sri Lanka’s apparel exports go to the US, while the US share in other manufacturing products is 67.6% (Figure 4). The high reliance on these sectors increases their vulnerability to tariff shocks and plunges in demand in the US market.

Figure 4: Evolution of tariffs for the top four export sectors to the US by Sri Lanka

Source: Author’s calculations.

Facing the Tariff Challenges: Current Options for Sri Lanka

As the Section 232 steel and aluminium tariffs, 10% global tariff, and exemptions are already effective, a significant challenge exporters face is meeting reporting requirements. For example, exporters need to report the steel and aluminium content for tariff calculations, and failure will result in the automatic application of 25% to the total value of the derivative product.

In addition, the country of origin of steel and aluminium used in derivative products should be declared to avoid the 200% tariff imposed for aluminium and steel from Russia. Thus, reporting can be a technically challenging and costly task for exporters.

In addition, Sri Lanka needs to be vigilant and follow the US CBP guidance to avoid higher tariffs due to rules of origin; If a different country is identified as the country of origin, Sri Lanka must pay the tariff rate applied to that particular country. Irrespective of the outcome of negotiations on the 44% reciprocal tariffs, the Section 232 tariffs, reporting requirements, and rules of origin complexities will prevail. The necessary technical assistance should be provided to the exporters to minimise the tariff cost under the current US trade policy regime. (Colombo/May16/2025)

Climate Change

Sri Lanka’s flash floods in capital point to systemic institutional failure, ignored directives

Monday November 9, 2026 6:00 pm

ECONOMYNEXT – As torrential monsoon downpours transformed Sri Lanka’s commercial capital’s thoroughfares into raging brown rivers on Friday (06) submerging vehicles, paralyzing public transit, and inundating critical facilities like the National Hospital, the crisis was framed by authorities as an act of nature.

But for the millions of residents wading through waist-deep water, the disaster was not merely meteorological. It was man-made, preventable, and a glaring testament to gross institutional negligence.

Vraîe Cally Balthazaar, the Mayor of the island nation’s biggest local governing body Colombo Municipal Council (CMC) posted on her FaceBook (Meta) platform just a week ago before the floods that people in her ward “have had to live with the risk of flooding for years” after the stormwater drain running through the Jawatta Public Cemetery collapsed in 2019.

She said in the post that she promised the residents that the CMC would get the repairs done before the end of September, and she was happy to say that the CMC has “managed to complete the work by September 15.

“And sometimes, something as simple as fixing a drain can make a real difference to an entire neighbourhood,” Balthazaar said.

However, the flash floods saw the same area heavily flooded despite the ‘fixing’ by the CMC.

Just 24 days before the floods, Prime Minister Harini Amarasuriya herself issued a direct, unequivocal order to government officials and municipal authorities to treat the cleaning of Colombo’s canal and drainage systems as an exceptional priority.

She directed to expedite the work and complete it within two weeks to ensure proper rainwater management amid anticipated increases in rainfall.

Prime Minister Amarasuriya issued these directives while addressing the Colombo District Coordinating Committee meeting held on October 13 at the Narahenpita District Secretariat.

During the meeting, officials from divisional secretariat offices, the Agrarian Development Department, and the Provincial Irrigation Department highlighted existing challenges in cleaning drainage and canal systems, noting issues such as a shortage of technical officers and difficulties faced in formulating plans and estimates.

Her instruction came in response to early meteorological indicators pointing toward an intensifying inter-monsoonal rainfall season.

But the floods last week proved that these directives had been ignored, delayed, and left unimplemented by the very bodies sworn to protect the city’s populace.

Recognizing the chronic vulnerability of the commercial capital’s low-lying geography, the Prime Minister instructed relevant stakeholders to systematically clear Colombo’s primary canals, secondary outlets, and subterranean drainage systems.

Crucially, the directive came with a strict deadline: a two-week window to complete the comprehensive clearing of blockages, silt, and solid waste that choke the city’s waterways.

Colombo would not have had last week’s floods, had the Prime Minister’s instruction been heeded and executed.

But the Prime Minister’s instruction designed precisely to preempt the catastrophic urban flooding that has chronically plagued Colombo during heavy weather was ignored.

Yet, when the skies opened up last Friday (06), the two-week deadline had long expired into the ether of bureaucratic inaction.

The canals remained congested with plastic debris, unauthorized construction bottlenecks, and thick layers of silt.

The drainage systems, starved of maintenance, failed instantly.

Neither the central government machinery nor the Colombo Municipal Council (CMC) can wash their hands of accountability.

The ‘Clean Sri Lanka’ programme under the current government has been created to deal with prevention of flooding among many other ambitious goals.

“The responsibility for this damage must be borne by the President even more than the Mayor,” former Urban Development and Megapolis Minister Champika Ranawaka, a strong government critic, said on his YouTube platform.

“He is the head of the disaster management apparatus, and ‘Clean Sri Lanka’ operates under his direct leadership. Because of his actions and their administrative conduct, the entire state machinery has been brought to a standstill.”

Anatomy of Municipal Paralysis

When orders from the higher office like Prime Minister of the state can be casually sidelined by municipal inertia, it exposes a profound fracture in governance, one where public safety is compromised by institutional paralysis.

At the heart of Colombo’s drainage crisis is a systemic failure of local governance and inter-agency coordination.

The Colombo Municipal Council, tasked with the day-to-day stewardship of municipal infrastructure, waste management, and local drainage networks, has long operated in an administrative comfort zone characterized by reactive posturing rather than proactive mitigation.

When the Prime Minister’s directive was issued in mid-October, it should have triggered an immediate emergency mobilization.

Municipal work crews, heavy machinery, and desilting operations ought to have been deployed across every vulnerable ward, from the commercial hubs of Fort and Pettah to densely populated residential quarters like Borella, Wellawatte, and Grandpass.

Instead, citizens witnessed what can only be described as administrative inertia.

Bureaucratic red tape, sluggish procurement of maintenance contracts, and a lack of accountability mechanisms meant that instructions from the Prime Minister trickled down into endless committee meetings rather than field operations.

By treating a critical pre-monsoon cleanup as a routine administrative task rather than an urgent, life-saving imperative, municipal officials displayed a reckless disregard for urban risk management.

The government repeatedly said it has collected ample tax revenue to run the country. But that money could not be used urgently to protect the Colombo city when it was evident what was going to happen as per Prime Minister Amarasuriya’s instructions.

Furthermore, the failure extends beyond mere delayed cleanups to encompass chronic structural enforcement failures.

Over decades, Colombo’s natural hydrological buffers including its wetlands, marshes, and secondary flood retention areas have been systematically degraded or encroached upon by uncoordinated commercial and residential developments.

When drainage systems are clogged with garbage while vital retention pathways are blocked by concrete, even a standard heavy downpour is bound to trigger catastrophe.

Friday’s deluge merely exposed the cumulative cost of this willful administrative blindness.

Economic Toll of Negligence

The consequences of this systemic failure were borne immediately by ordinary citizens and critical public infrastructure.

The inundation of the National Hospital of Sri Lanka, where floodwaters unprecedentedly breached critical service areas, should be considered a national scandal.

That a premier healthcare institution can be crippled within 2 hours of heavy rain, jeopardizing patient care and compromising sterile environments, illustrates the deadly stakes of municipal failure.

Beyond the hospitals, small business owners watched their livelihoods float away, commuters were stranded for hours in gridlocked, submerged buses, and low-income families residing in underserved settlements suffered extensive property damage.

For an urban economy trying to anchor Sri Lanka’s fragile post-crisis recovery, recurring paralyzing floods exact a heavy toll in lost productivity, infrastructure damage, and emergency response costs.

Accountability

The CMC and government have pointed fingers at the illegal structures erected under past governments for the latest disaster. But this government has already been in power for two years.

In the aftermath of the disaster, routine finger-pointing between central agencies and municipal bodies also has begun, with officials attempting to deflect blame onto unprecedented rainfall volumes.

But meteorological data offers no refuge for negligent administrators.

The rainfall, while heavy, was seasonally anticipated; indeed, it was precisely why the Prime Minister issued her October directive.

When a directive issued by the second-in-command of the country is left gathering dust on a municipal desk while citizens face preventable devastation, the social contract breaks down.

The current government and the Colombo Municipal Council cannot hide behind excuses of resource constraints or administrative oversight.

Preventing flash floods requires more than issuing seasonal press releases or convening post-disaster committees after the water has receded.

It demands rigorous enforcement, transparent institutional accountability, and a zero-tolerance approach to administrative lethargy.

If the authorities cannot execute basic drainage maintenance, Colombo will remain structurally vulnerable, hostage to the next raincloud, and failed by the very institutions meant to protect it. (Colombo/November 08/2026)

Bonds & Forex

Sri Lanka rupee closes at 332.53/59 to US dollar spot, bond yields edge up

Monday November 9, 2026 5:05 pm

ECONOMYNEXT – Sri Lanka’s rupee closed at 332.53/59 to the US dollar spot on Monday, from 332.55/60 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2029 closed at 190/98 percent, up from 10.85/95 percent.

A bond maturing on 01.08.2030 closed at 11.07/12 percent, up from 11.05/10 percent.

A bond maturing on 01.02.2031 closed at 11.30/40 percent, up from 11.10/15 percent.

A bond maturing on 15.12.2032 closed at 11.65/70 percent, up from 11.55/65 percent.

A bond maturing on 01.11.2033 closed at 11.95/12.00 percent, up from 11.90/95 percent.

A bond maturing on 15.10.2034 closed at 12.10/15 percent, up from 12.05/12 percent.

A bond maturing on 15.08.2036 closed at 12.40/50 percent, up from 12.30/40 percent. (Colombo/Nov9/2026)

Markets

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Monday November 9, 2026 3:29 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed up on Monday, CSE data showed, with the benchmark All Share Price Index moving up 1.37 percent.

The ASPI was up 291.72 points at 21,531.37, while the more liquid S&P SL20 was up 1.67 percent, or 100.96 points, at 6,146.34.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 2.86 percent at 216.00 rupees), Hatton National Bank (up 1.52 percent at 399.75 rupees), Asiri Hospital Holdings (up 12.86 percent at 31.60 rupees), Tokyo Cement Company (up 5.22 percent at 84.70 rupees), and Access Engineering (up 3.93 percent at 81.90 rupees).

Carson Cumberbatch (down 4.24 percent at 712.00 rupees), Richard Pieris and Company (down 2.43 percent at 28.10 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), Renuka Holdings (down 2.63 percent at 37.00 rupees), and Chevron Lubricants Lanka (down 0.61 percent at 204.25 rupees) were top negative contributors.

Market turnover was 3.33 billion rupees. The S&P/CSE Banks Industry Group led turnover with 667.76 million rupees.

The session saw heavy crossings, according to Raynal Wickremeratne, Head of Research and Strategy at NDB Securities. Significant crossings included Keells (23 million rupees), Distilleries Company (27.7 million rupees), Sunshine Holdings (30.6 million rupees), Commercial Bank (32.4 million rupees), Ceylon Tobacco Company (35.6 million rupees), Hatton National Bank (39.5 million rupees), Prime Lands (40.5 million rupees), and HAS Holdings (41.5 million rupees).

In corporate news, Hayleys Retail Holdings Ltd announced it has partnered with supply chain software provider Blue Yonder to build and scale an AI-native grocery supermarket chain across Sri Lanka. (Colombo/Nov09/2026)

Information Technology

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Monday November 9, 2026 3:12 pm

ECONOMYNEXT — Hayleys Retail Holdings Ltd has selected supply chain software provider Blue Yonder to build its grocery retail operations from the ground up, the two companies said in a joint statement.

Hayleys Retail, a member of Sri Lanka’s diversified conglomerate Hayleys Group, plans to open several stores in the near future to serve consumers across the country. The agreement marks Blue Yonder’s first retail customer in Sri Lanka.

“Our entry into supermarket retail is about bringing that same commitment to quality and reliability closer to everyday Sri Lankan consumers,” Mohan Pandithage, Chairman and Chief Executive of Hayleys PLC said.

“With Blue Yonder, our teams will have AI-driven insight to deliver a seamless, consistent shopping experience across every store,” he said.

Hayleys, which accounts for approximately 5 percent of Sri Lanka’s export income and operates across 17 business sectors, is entering the large-scale supermarket space by drawing on its group strengths in manufacturing, logistics, and services.

The company selected Blue Yonder to connect its data across merchandising and shelf space, deploy artificial intelligence agents to catch operational issues early, and scale its business into a national network without changing platforms.

The rollout will begin with merchandise operations to manage suppliers, items, costs, and pricing, followed by machine learning capabilities to forecast demand and balance store inventory during seasonal peaks.

“Hayleys Retail is choosing one where AI is the foundation rather than an add-on—connected data and agentic AI built into core merchandising operations, and planning that learns as the business grows,” Antonio Boccalandro, President, APAC at Blue Yonder said.

The retailer plans to use the platform to automate routine store tasks and adjust inventory according to real-time sales and local market trends as its store footprint grows. (Colombo/Nov09/2026)

Stocks & Companies

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

Monday November 9, 2026 1:16 pm

ECONOMYNEXT – Sri Lanka listed hospitality firm Citrus Leisure said it has extended an agreement to manage consumer-facing and entertainment spaces at the Colombo Lotus Tower, which includes revolving restaurant Blue Orbit, until June next year.

The initial agreement signed between Citrus Leisure and Colombo Lotus Tower Management Company (Private) Limited (CLTMC) is due to expire on December 11.

“The Board of Directors of CLTMC at meeting held on 2nd November 2026 has resolved to extend the term of the Management Agreement and continue the existing Management Agreement until 30th June 2027, to which the company has given its concurrence,” the company said in a market filing.

Citrus Leisure Plc opened its revolving restaurant at the Lotus Tower in December 2023.

The company signed a 3-year agreement with CLTMC in May 2023 to provide services in the management of (l) the banquet hall 1 on the 25th floor, (2) the banquet hall 2 on the 26th floor, (3) the revolving restaurant on the 27th floor, (4) the 6 suites situated on the 28th floor and the kitchen in the basement floor of the Colombo Lotus Tower.

The 350-meter or 1,150-feet tower, the tallest in South Asia, was built at a cost 104.3 million US dollars with 80 percent of the money borrowed from Exim Bank of China.

Located in the commercial heart of Colombo, the tower has been called a symbolic landmark of Sri Lanka as well as a colossal white elephant and has been mired in controversy for years. (Colombo/Nov9/2026)

Markets

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Monday November 9, 2026 11:50 am

ECONOMYNEXT — Sri Lanka conglomerate CIC Holdings recorded a net profit of 1.66 billion rupees for the quarter ended September 30, rising 20.3 percent from 1.38 billion rupees in the same quarter last year, interim accounts showed.

The group posted basic earnings per share of 0.87 rupees for the September quarter, up from 0.73 rupees a year earlier.

Quarterly revenue grew 3.4 percent to 20.89 billion rupees from 20.20 billion rupees, supported by broad-based growth across industrial solutions, livestock, and healthcare segments, which counterbalanced relative demand moderation in agricultural inputs.

Cost of sales rose 5.3 percent to 15.20 billion rupees, outpacing revenue growth and causing gross profit to contract marginally by 1.2 percent to 5.68 billion rupees.

Results from operating activities dropped 7.3 percent to 2.66 billion rupees from 2.87 billion rupees, impacted by higher operating overheads.

Selling expenses expanded 6.8 percent to 2.15 billion rupees, and general and administrative expenses climbed 5.8 percent to 1.07 billion rupees, while other operating income dropped 29.6 percent to 117.40 million rupees.

However, operating profits were cushioned by an impairment reversal on trade receivables of 85.83 million rupees, turning around from an impairment provision of 23.38 million rupees in the corresponding quarter last year.

Net finance costs climbed 35.4 percent to 712.25 million rupees from 526.01 million rupees.

The increase was driven by a 30.8 percent rise in finance expenses to 771.46 million rupees, primarily reflecting higher interest expenses on loans to finance elevated working capital and inventory requirements.

The quarter’s bottom line was strongly bolstered by CIC’s equity-accounted investment in John Keells Holdings PLC (JKH).

Share of profit from equity-accounted investees surged more than fourfold to 590.50 million rupees from 257.87 million rupees, driven by JKH’s strong profit expansion during the period.

The group also recognized a gain on bargain purchase of 55.59 million rupees during the quarter resulting from additional share purchases in JKH where the proportionate net asset value exceeded acquisition cost, compared to no such gain a year earlier.

With associate income gains offsetting operating margin contraction and higher borrowing costs, group pre-tax profit held virtually flat at 2.59 billion rupees, down 0.11 percent.

Income tax expense fell 29.4 percent to 606.24 million rupees from 858.71 million rupees, driving total group profit for the period up 14.1 percent to 1.98 billion rupees.

Total group assets stood at 108.58 billion rupees as of September 30, up from 99.75 billion rupees at the end of March 2026.

Group net asset value per share increased to 25.52 rupees from 22.10 rupees a year earlier.

CIC Holdings’ ordinary voting shares closed at 27.80 rupees at the end of September.(Colombo/Nov09/2026)