Trump tariffs and their effect on world trade and economy with particular reference to Sri Lanka

In the early hours of April 2, 2025, President Donald Trump stood before a crowd of supporters and declared it "Liberation Day" for American workers and manufacturers. He signed an order imposing a minimum 10% tariff on all US imports, with significantly higher rates, ranging from 11% to 50%, on goods from 57 specific countries. This dramatic policy shift sent immediate shockwaves through global markets and trade networks, marking a profound escalation of the protectionist agenda that has defined Trump's economic philosophy since the 1980s.

- BY ALI SABRY

The implications of these tariffs extend far beyond America's borders, rippling through the intricate web of global trade relationships that have been carefully constructed over decades of economic integration. While Trump frames these measures as necessary corrections to trade imbalances and vital protections for American industry, the truth is, it’s way more complicated than that. These tariffs aren't just minor tweaks to trade rules, they could totally upend the way global trade works in the global economic order, disruptions that will be felt most acutely by developing economies that have built their growth strategies around export-oriented industries.

Among these vulnerable economies stands Sri Lanka, still recovering from a devastating economic crisis that led to sovereign default in 2022. With the United States serving as Sri Lanka's largest export destination, accounting for 23% of its total exports and a whopping 38% of Sri Lanka’s key textile and apparel exports, the sudden imposition of a 44% tariff rate threatens to undermine the country's fragile economic recovery. Approximately 350,000 Sri Lankan workers are directly employed in the textile industry. These tariffs aren't some far-off policy, they are an immediate threat to their livelihoods and economic security.

The story of Trump's tariffs and their impact on Sri Lanka offers a compelling window into the broader tensions and power imbalances that characterise the global trading system. It illustrates how decisions made in Washington can dramatically alter economic trajectories in distant corners of the world, often with little consideration for the human consequences. It also raises profound questions about the sustainability of development models predicated on export dependency and the adequacy of international financial institutions’ approaches to debt sustainability in developing economies.