Is global free trading paradoxical?

HISTORY tells us that the 2008 GFC was effectively managed with the coordinated effort and participation of nations and states. Would this be the current state of reviving world economy in the event of future GFCs, in particular the most vulnerable economies? The departure from collective support and drift towards national-centric mindset and geopolitics is becoming a major barrier in the future for global participation.

- 

As an immediate example, the Trump’s high reciprocal tariff across its US trading partners demonstrated the emergence of nationalised policies with no concerns to the long-term trading partners. Global free trade has benefits and drawbacks that lead to opposing situations despite is often touted for economic growth, reduce prices through healthy competition, etc. The COVID-19 pandemic made countries to look beyond free trade, especially in the event the closure and restriction of borders.

Impact to Sri Lanka

With the recent declaration of Trump’s reciprocal tariffs, in spite of sending warning signals during his presidential campaign, Sri Lanka Government was least concerned of its consequences to the exports to US which was likely to affect the apparel industry. The announcement of 44% tariffs, 2 April 2025, based on the trade imbalance, which primarily based on FoB (Free on Board) price difference of volume of exports to imports and halving the value. The announcement of lowering to 30%, Government claims it was a result of ongoing negotiations with US counterparts. The new tariff now becomes 40% which constitute a 10% base-levy added to 30% resulting an aggregate 40%. The 10% baseline levy is charged inside USA primarily to bolster US local industries and applies to all exporting countries. The tariff is viewed as a discouragement of exports for goods of Sri Lankan origin unless measures are taken to counter the tariff burden.