Trump Enacts 44% Tariff on Sri Lankan Goods, Affecting Global Markets and Apparel Stocks

This article discusses the recent 44% tariff imposed by U.S. President Donald Trump on Sri Lankan goods as a response to high trade barriers imposed by Sri Lanka. The move has resulted in negative repercussions for global stock markets and has adversely affected Sri Lanka’s apparel stocks. The U.S. remains Sri Lanka’s primary export market, and this tariff could lead to further economic challenges for both countries.

United States President Donald Trump has enacted a 44% tariff on Sri Lankan goods, citing this measure as a reciprocal reaction to what he characterizes as an 88% tax and trade barrier imposed by Sri Lanka on U.S. exports. This tariff comes at a crucial time as the United States represents Sri Lanka’s largest export market, comprising 23% of the nation’s total merchandise exports. In 2024, the total trade between the two countries was valued at $3.4 billion, with an increase in U.S. imports from Sri Lanka by 6.1% to $3.0 billion and exports rising by 4.9% to $368.2 million. Nevertheless, the trade deficit between the U.S. and Sri Lanka has expanded to $2.6 billion, reflecting a 6.3% increase compared to the previous year.

In 2023, Sri Lanka’s primary exports to the U.S. included a variety of clothing items such as men’s and women’s undergarments, outerwear, rubber tires and tubes, T-shirts, gloves, jerseys, motor vehicle parts, activewear, and baby garments. The new tariff announcement has incited turmoil in global financial markets; for instance, Japan’s Nikkei index in Tokyo plummeted by 4%, while South Korea’s Kospi index fell by 3%. This bearish sentiment extended to European markets with the UK’s FTSE 100 decreasing by 0.9%, Germany’s DAX by 1.3%, and France’s CAC by 1.6%.

Although Trump’s announcement was made after U.S. markets closed, it resulted in a significant drop in stock futures. The S&P 500 futures declined by 3.6%, and Nasdaq-100 futures fell sharply by 4.5%. Prominent U.S. brands such as Apple, Nike, and Tesla experienced an approximate 7% decrease in their stock shares. In light of these developments, Goldman Sachs has raised its forecast for the likelihood of a U.S. recession within the next 12 months to 35%, up from the previous 20%, and warned that such economic conditions typically lead to further declines on Wall Street.

Following the implementation of the new tariff, Sri Lanka’s Colombo Stock Market reacted adversely, particularly within the apparel sector, where stocks decreased between 8 to 11 percent.

The imposition of a 44% tariff by the United States on Sri Lankan goods represents a significant escalation in trade tensions, particularly affecting Sri Lanka’s vital apparel export sector. With the United States being Sri Lanka’s largest export market, this development is likely to have far-reaching consequences for both economies. The immediate reaction in global financial markets indicates potential instability, bolstering fears of a looming U.S. recession, which poses additional risks for investors and businesses engaged in international trade.

Original Source: sundaytimes.lk