US reciprocal tariffs and Sri Lanka's economy

THE recent economic measures introduced by the United States have had a profound impact on global trade, with Sri Lanka being one of the most affected nations. Under President Donald Trump, a series of “reciprocal tariffs” were implemented to address perceived unfair trade practices by several countries, including Sri Lanka. These tariffs, which range from 11% to 50%, are expected to have a lasting effect on Sri Lanka’s economy, particularly its export sectors and stock market. Notably, Sri Lanka is among the top 10 countries affected by these tariffs, facing a rate as high as 44%.

- By Visvalingam Muralithas

Among the nations facing the highest tariffs, Lesotho and Madagascar stand out with a 50% tariff. Sri Lanka, Myanmar, and Laos also face hefty tariffs of 44%. Other countries affected include Vietnam (46%), Cambodia (49%), Syria, and the Falkland Islands (41%). Countries such as China, India, Malaysia, and Thailand face tariffs between 30% and 40%. On the lower end of the spectrum, Cameroon (11%), Mozambique (16%), and Malawi (17%) face comparatively lower tariffs. These tariffs are intended to reduce the US trade imbalance with these countries, potentially affecting their economies, with Sri Lanka being one of the hardest hit.

In 2023, Sri Lanka had trade surplus with the United Stets, amounting to approximately $ 2.49 billion. US exports to Sri Lanka totalled $ 351.1 million, while imports from Sri Lanka reached $ 2,842.1 million. For 2024, US exports to Sri Lanka are expected to rise slightly to $ 368.2 million, while imports from Sri Lanka are forecast to increase to $3,015.6 million, resulting in a projected trade deficit of $ 2.65 billion. Early estimates for the first two months of 2025 suggest the trade deficit will persist at $ 532.3 million.

Ratio calculation Surplus against the exports as a percentage = (Trade surplus / export revenue) * 100 Surplus against the exports as a percentage = ($ 2.65 / $ 3,015.6) * 100 = 88%

Key export products to the US

■Tea: Sri Lanka's world-renowned tea could see increased demand

■Plastics and rubber

■Jewellery and precious metal articles

■Fish and shellfish

■Machinery and electrical equipment

■Apparel and textile products However, the US tariffs present a significant challenge to the competitiveness of these products, particularly in the apparel sector, one of Sri Lanka's largest export industries.

Sri Lanka's top imports from the United States

1. Animal feed

2. Pharmaceutical products

3. Electrical and electronic products