Impact of 44% Tariff on Sri Lanka: Market Reactions and Economic Concerns
President Trump imposed a 44% tariff on Sri Lanka in response to high trade barriers on U.S. goods. This action impacts the largest export market for Sri Lanka, leading to declines in stock markets worldwide and increased fear of a recession. The Colombo Stock Market also recorded significant drops in apparel stocks.
United States President Donald Trump has implemented a substantial 44% tariff on Sri Lankan imports, which he claims is a reciprocal action against Sri Lanka’s existing 88% trade barriers on U.S. products. This significant decision coincides with the fact that the United States is Sri Lanka’s largest export market, representing 23% of the nation’s merchandise exports.
In 2024, the total goods trade between the U.S. and Sri Lanka was valued at $3.4 billion. During this period, imports from Sri Lanka rose by 6.1% to $3.0 billion, while exports to Sri Lanka increased by 4.9% to $368.2 million. However, the trade deficit experienced an increase of 6.3%, reaching $2.6 billion compared to the previous year.
Key Sri Lankan exports to the U.S. in 2023 included apparel items such as men’s and women’s undergarments, outerwear, rubber tyres, T-shirts, gloves, motor vehicle parts, activewear, and baby garments. The imposition of this tariff has sent tremors through global stock markets, leading to significant declines, with Japan’s Nikkei index recording a drop of 4% and South Korea’s Kospi experiencing a decline of 3%.
The negative impact extended to European markets as well, with the UK’s FTSE 100 down by 0.9%, Germany’s DAX decreasing by 1.3%, and France’s CAC falling by 1.6%. While Trump’s announcement came post U.S. market hours, stock futures plummeted, with S&P 500 futures dropping by 3.6% and Nasdaq-100 futures seeing a decline of 4.5%. Notably, major American corporations such as Apple, Nike, and Tesla incurred share losses of approximately 7%.
Additionally, Goldman Sachs has raised the probability of a recession in the United States within the next year to 35%, an increase from the previous 20% estimate, indicating potential for further financial downturns on Wall Street. In response to the new tariff, the Colombo Stock Market witnessed a decline in apparel stocks, which traded down between 8% and 11%.
In summary, President Trump’s recent implementation of a 44% tariff on Sri Lankan goods is a response to perceived trade imbalances. This decision, set against the backdrop of significant trade relations, has impacted global markets, leading to declines in stock indices across Asia and Europe. Additionally, U.S. market futures have suffered, raising concerns about a potential recession. The apparel sector in Sri Lanka has also reacted negatively, with substantial decreases in stock values noted.
Original Source: sundaytimes.lk
