U.S. Imposes 44% Tariff on Sri Lankan Goods, Sparking Market Reactions

U.S. President Trump has enacted a 44% tariff on Sri Lankan goods, citing high taxes on American exports. This move impacts the U.S.-Sri Lanka economic relationship, which totaled $3.4 billion in 2024. Global stock markets reacted negatively, with significant declines noted in Asia and Europe. The Colombo Stock Market reflected similar concerns, particularly in apparel stocks.

In a significant trade development, U.S. President Donald Trump has imposed a 44% tariff on Sri Lankan goods, citing Sri Lanka’s reportedly high trade taxes and barriers on American exports, stated to be 88%. This decision is noteworthy as the United States is Sri Lanka’s largest export market, making up 23% of its total merchandise exports. In 2024, the bilateral trade between the two nations was valued at $3.4 billion, highlighting a complex economic relationship that is now strained.

The primary exports from Sri Lanka to the U.S. in 2023 comprised various apparel items, including men’s and women’s undergarments, outerwear, T-shirts, and other clothing types, alongside rubber tyres and motor vehicle parts. This tariff imposition has not only altered trade dynamics but also sent tremors through global financial markets. Following the announcement, Japan’s Nikkei index fell by 4%, while South Korea’s Kospi declined by 3%, indicating widespread investor concern.

European markets were also affected; the UK’s FTSE 100 slipped 0.9%, Germany’s DAX decreased by 1.3%, and France’s CAC fell by 1.6%. Although the tariff news emerged post the U.S. market closure, stock futures indicated a bearish trend, with S&P 500 futures dropping by 3.6% and Nasdaq-100 futures plunging by 4.5%. Major U.S. corporations like Apple, Nike, and Tesla experienced a roughly 7% decline in their stock prices.

Moreover, Goldman Sachs has revised its forecast regarding a potential U.S. recession, increasing its likelihood to 35% over the next year, which typically signifies adverse impacts on stock performance. In Sri Lanka, the Colombo Stock Market reacted negatively to the tariff announcement, with apparel stocks declining between 8% to 11%, reflecting the palpable anxiety in the market.

The imposition of a 44% tariff by the United States on Sri Lankan goods marks a significant shift in trade relations, primarily attributed to Sri Lanka’s burdensome trade tariffs on U.S. exports. This tariff not only threatens Sri Lanka’s economy, where the U.S. is a major trading partner, but it also has led to a notable decrease in stock prices across various markets globally, igniting fears of a possible recession. The situation necessitates careful monitoring and strategic responses to mitigate potential economic fallout.

Original Source: sundaytimes.lk