SouthViews No. 304, 21 January 2026
Trade Policy Uncertainty and Impacts on Developing Countries’ Exporters: The Case of Sri Lanka
By Anushka Wijesinha and Senith Abeyanayake
Key Takeaways:
- Rapid increases in uncertainty have material implications for economies. Each tariff announcement by the US President triggered a fresh round of uncertainty and speculation, with ambiguities of implementation and frequent changes in timelines.
- Global indices tracking uncertainty are recording historic highs in recent months.
- Our study of Sri Lankan export-oriented firms finds that there is wide variation in how, and to what extent, trade policy uncertainty has affected them. Firms experienced mixed impacts on orders to the US, with differences observed both within and across sectors.
- Buyer reactions to tariff announcements were mixed, with some ‘wait-and-see’ approaches and some margin shrinkage. Exporters have taken diverse measures to adapt to the uncertainty, ranging from absorbing margin losses to commencing export diversification.