In the wake of Donald Trump's recent election victory on November 16, 2024, significant concerns have emerged regarding the implications of his proposed trade policies for Sri Lanka's economy. The Institute of Policy Studies (IPS) has analyzed the potential impact, highlighting that the US is a crucial export destination for Sri Lanka, accounting for 23.6% of its total exports. [9728bb32]
Trump's administration has suggested imposing substantial tariff increases, including an additional 20% on various imports. This could lead to a staggering loss of approximately USD 187.9 million in the wearing apparel sector alone, representing an 8.1% contraction from 2022 levels. Other sectors, such as rubber, plastic, and chemical products, are also expected to suffer as a result of reduced US demand for imports. [9728bb32]
Moreover, the potential for a trade war could have broader implications, with the European Union's economy projected to decline by 1.5%, which could further suppress demand for Sri Lankan exports. This downturn could result in an estimated loss of Euro 260 billion across the EU, exacerbating the challenges faced by Sri Lankan exporters. [9728bb32]
In light of these developments, experts recommend that Sri Lanka maintain its preferential tariffs in other regions and consider joining regional trading blocs such as the Regional Comprehensive Economic Partnership (RCEP) to mitigate the adverse effects of Trump's trade policies. [9728bb32]
As the global trade landscape evolves under Trump's administration, Sri Lanka faces critical choices to protect its economy and sustain its export growth amidst these challenges. [9728bb32]