By: Staff Writer
February 24, Colombo (LNW): The fallout from Donald Trump’s aggressive tariff strategy is reverberating far beyond Washington, sending tremors through Sri Lanka’s fragile export economy.
After the Supreme Court of the United States invalidated Trump’s emergency tariffs, the former president criticized the justices and vowed to pursue alternative legal avenues. His administration is now eyeing Section 122 and Section 301 of the Trade Act of 1974—mechanisms that could once again ensnare trading partners like Sri Lanka.
At issue is not just legality, but economic fallout.
Legal Limits, Political Resolve
The Supreme Court warned that unilateral tariffs represented a “transformative expansion” of presidential authority over tax policy powers constitutionally reserved for Congress. However Trump’s readiness to pivot to other statutes signals a determination to maintain trade pressure.
Under Section 301, investigations could target countries accused of unfair practices, including digital taxation, pharmaceutical pricing controls, and alleged labor violations. Sri Lanka’s policy landscape shaped by IMF-backed fiscal tightening could attract scrutiny.
Apparel Exports at Risk
Sri Lanka’s apparel exports to the US form the backbone of its manufacturing sector. Factories operating on tight margins cannot easily withstand sudden tariff hikes. Buyers in the US retail market are notoriously price-sensitive and quick to reallocate sourcing.
A 10 percent surcharge, even if temporary, could disrupt contracts negotiated months in advance. Smaller manufacturers may struggle to renegotiate terms, while larger firms might accelerate automation or workforce reductions.
The apparel industry’s interconnectedness with global brands means decisions taken in Washington boardrooms ripple swiftly to Colombo’s factory floors.
Broader Economic Consequences
Sri Lanka is still emerging from a balance-of-payments crisis. Foreign exchange reserves remain delicate. Any sustained decline in US-bound exports would weaken dollar inflows, potentially pressuring the rupee and complicating macroeconomic stabilization.
Moreover, uncertainty dampens investment. Exporters hesitate to expand capacity when trade policy appears volatile.
While some US industries such as steel retain protectionist backing, many American firms are deeply embedded in global supply chains and may oppose sweeping tariffs. Yet political calculus often trumps economic orthodoxy.
For Colombo, the message is stark: dependence on a single dominant market amplifies exposure to geopolitical shifts.
If Washington proceeds with new tariffs, Sri Lanka’s apparel sector could become collateral damage in a broader trade confrontation testing the resilience of an economy still on the mend.
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