Impact of Trump’s 44% Tariff on Sri Lanka’s Trade and Global Markets

President Donald Trump has instituted a 44% tariff on Sri Lankan goods as retaliation against Sri Lanka’s high trade barriers. This decision impacts US-Sri Lanka trade dynamics, sparking declines in global stock markets and raising recession forecasts.

United States President Donald Trump has enacted a 44% tariff on Sri Lankan goods, characterizing it as a reciprocal reaction to the 88% levies and trade obstacles that Sri Lanka imposes on U.S. exports. This decision is particularly significant as the United States constitutes Sri Lanka’s largest export market, responsible for 23% of the nation’s total merchandise exports.

In 2024, the trade in goods between the U.S. and Sri Lanka was valued at approximately $3.4 billion. Imports from Sri Lanka saw a rise of 6.1%, totaling $3.0 billion, while exports increased by 4.9%, amounting to $368.2 million. The trade deficit between the two nations grew to $2.6 billion, reflecting a 6.3% increase compared to the previous year.

In 2023, Sri Lanka’s primary exports to the United States comprised men’s and women’s undergarments, outerwear, rubber tires, T-shirts, gloves, jerseys, motor vehicle components, activewear, and children’s clothing. The imposition of the tariff has created uncertainty in global stock markets, with significant declines reported in indices worldwide.

The Guardian noted that Japan’s Nikkei index fell by 4%, while South Korea’s Kospi index decreased by 3%. European markets were similarly affected, as evidenced by the UK’s FTSE 100 dropping 0.9%, Germany’s DAX declining by 1.3%, and France’s CAC falling by 1.6%.

Although Trump’s announcement occurred after U.S. markets closed, stock futures, including those tied to the S&P 500 and Nasdaq-100, fell by 3.6% and 4.5%, respectively. Prominent U.S. companies, such as Apple, Nike, and Tesla, experienced a drop in stock prices, averaging around 7%. Goldman Sachs has responded by raising its forecast of a U.S. recession to 35% within the next year, an increase from the previous prediction of 20%. Following the tariff announcement, the Colombo Stock Market also reacted adversely, with apparel stocks declining between 8% and 11%.

In summary, the imposition of a 44% tariff by President Trump on Sri Lankan goods, as a countermeasure to Sri Lanka’s trade barriers, has led to significant repercussions in both Sri Lankan and global stock markets. The trade dynamics between the two nations highlight the critical economic interdependence, with implications for numerous sectors, particularly apparel. The rising probability of a U.S. recession further complicates the economic landscape, warranting close observation.

Original Source: sundaytimes.lk