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On April 2, 2025, President Donald Trump enacted a series of tariffs known as the “Liberation Day” tariffs, significantly impacting global trade dynamics, including those involving Sri Lanka. These measures aim to address perceived trade imbalances but have raised concerns among affected nations.
The “Liberation Day” tariffs introduced a 10% baseline tariff on imports from all countries, effective immediately. Additionally, a reciprocal tariff policy was applied to nations with substantial trade deficits with the U.S., resulting in tariffs ranging from 20% to 49% on countries such as China, Vietnam, Cambodia, Bangladesh, Indonesia, Sri Lanka, Taiwan, and India. Notably, Chinese goods faced a combined tariff rate of 54%, comprising a 20% standard tariff and a 34% reciprocal tariff. Furthermore, a 25% tariff was imposed on all imported automobiles.
Sri Lanka, heavily reliant on garment exports to the U.S., faces a significant challenge due to these tariffs. The newly imposed 44% tariff on Sri Lankan garments threatens the $1.9 billion garment export industry, jeopardizing approximately 300,000 jobs. This development mirrors the situation in Bangladesh, which confronts a 37% tariff on its garment exports, prompting concerns over order cancellations and job losses.
In light of these developments, Sri Lanka is proactively seeking trade concessions from the U.S. A delegation is scheduled to visit the United States to engage in discussions with the U.S. Trade Office, aiming to secure exemptions from the tariffs. Foreign Minister emphasized the urgency of these talks, highlighting the potential adverse effects on Sri Lanka’s economy if the tariffs remain unchanged.
The implementation of these tariffs has had a profound impact on global financial markets. The Dow Jones Industrial Average experienced its most significant decline since 2020, dropping 1,679 points. International bodies, including the International Monetary Fund, have expressed concerns about potential risks to global economic growth, warning that such protectionist measures could lead to inflationary pressures and a possible recession.
As the situation develops, Sri Lanka’s engagement with the U.S. Trade Office will be crucial in determining the future of its exports to the U.S. The outcome of these negotiations will significantly influence Sri Lanka’s economic landscape, particularly within the garment sector. The global community will also be closely monitoring the broader effects of these tariffs on international trade relations and economic stability.
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