Shielding Sri Lanka from looming economic storm: US tariff crisis

Following is a collective statement by trade unions and civil society organisations on the US tariff crisis and possible countermeasures the Government could take to reduce its impact

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THE long shadow of the US tariff war casts a pall of economic catastrophe over the third world, obscuring a crucial historical lesson at the heart of this crisis.

The 1991 dissolution of the Soviet Union and the subsequent ascendance of the US dollar as the dominant global reserve currency amplified the inherent Triffin Dilemma. With the US dollar now facilitating 88% of global foreign exchange transactions, a stark increase from the 41.5% observed during the Soviet Union's collapse, the United States has been compelled to incur escalating current account deficits to meet this demand, a trend mirrored by its expanding trade deficit since the mid-1990s. This necessary liquidity provision, paradoxically, erodes the dollar's long-term stability.

Ignoring the prescient counsel of John Maynard Keynes, who advocated for the supranational 'bancor' during the Bretton Woods negotiations, the US, in its pursuit of post-World War II global hegemony, appears to have embraced this predicament. The unfolding trade conflict resonates ominously with perilous historical junctures that culminated in two world wars. These damaging US import tariffs, particularly impacting the third world, are not isolated acts but rather manifestations of a profound geopolitical transition: the decline of the US's post-WWII political-economic dominance, coinciding with the burgeoning economic might of China, a trajectory accelerated by the 2008 US financial crisis. Furthermore, the erosion of global moral principles through complicity with the genocide in Gaza has normalised destructive and self-serving policies on the world stage.