U.S. Imposes 44% Tariff on Sri Lankan Goods, Impacting Global Markets

The U.S. imposed a 44% tariff on Sri Lankan goods as a response to trade barriers, affecting Sri Lanka’s economy and causing declines in global stock markets. The Colombo Stock Market’s apparel stocks dropped significantly, reflecting broader concerns over trade relations and economic stability.

The United States, under President Donald Trump, has implemented a 44% tariff on Sri Lankan goods, framing it as a reciprocal action to Sri Lanka’s 88% taxes and trade barriers on U.S. exports. This decision significantly impacts Sri Lanka, which relies heavily on the U.S. as its largest export market, making up 23% of its total merchandise exports.

In 2024, trade between the U.S. and Sri Lanka was valued at $3.4 billion, with U.S. imports from Sri Lanka rising 6.1% to $3.0 billion and U.S. exports increasing 4.9% to $368.2 million. The trade deficit between the countries grew to $2.6 billion, a 6.3% increase year-over-year. Key Sri Lankan exports to the U.S. include apparel items such as undergarments, outerwear, and T-shirts.

The tariff has caused significant turmoil in global stock markets. According to reports, Japan’s Nikkei index fell by 4%, while South Korea’s Kospi dropped by 3%. European markets were also affected; the UK’s FTSE 100 decreased by 0.9%, Germany’s DAX fell by 1.3%, and France’s CAC dropped by 1.6%.

After the announcement, U.S. stock futures reflected a negative outlook, with S&P 500 futures declining by 3.6% and Nasdaq-100 futures plummeting 4.5%. Major companies like Apple, Nike, and Tesla each observed a share decline of approximately 7% following the news. Furthermore, Goldman Sachs increased its prediction of a potential U.S. recession to 35% for the next year, up from 20%.

In the wake of this trade escalation, the Colombo Stock Market experienced adverse effects, particularly in its apparel sector, which saw declines ranging from 8% to 11%.

In summary, the recent implementation of a 44% tariff on Sri Lankan goods by the U.S. marks a significant escalation in trade tensions, heavily impacting Sri Lanka’s economy and global stock markets. With the U.S. being Sri Lanka’s largest export market, this tariff is likely to exacerbate the existing trade deficit and may have long-term repercussions for both countries. Investors should remain cautious as market reactions indicate potential economic instability ahead.

Original Source: sundaytimes.lk