Srilanka, July 21 -- U.S. President Donald Trump wrote to his Sri Lankan counterpart, President Anura Kumara Dissanayake, last week, informing him that the United States will impose a 30 percent tariff on all Sri Lankan exports from August 1.

While some argue that this rate is better than what some regional competitors like Laos and Cambodia face, it is clear that Sri Lanka's dependence on a handful of export markets and an even narrower band of products has left it vulnerable to sudden policy shifts by its main trade partners. It is also a warning of more pain ahead if the country doesn't fundamentally change course.

Since 1977, Sri Lanka has followed a model prescribed by international lenders and consultants, i.e., open markets, free...