US Tariffs: Glimmer of hope
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The world indeed is topsy-turvy! Firstly for a man who was known as a ‘bully’, Trump seems to have mellowed these days (or is it one of his ‘games he is playing’?) and is turning the clock back, initiating trade talks with China and moving towards conciliation while cozying up with the tsars in West Asia with mega deals.Then examine the other developments in the world and it makes you wonder how fast things change.
Consider this: The India-Pakistan conflict which threatened to impact on South Asia resulted in a Trump-led ceasefire (India disputes Trump’s role); the US and China have agreed to a 90-day pause in the new US tariffs, agreeing to bring down the import levies sharply on both sides; Trump reaching out to Syria and Iran, visiting Saudi Arabia and the UAE; sidelining Israel; Russia’s Putin calling for a ceasefire with Ukraine, of course on his own terms; while the Gaza conflict is raging on and foreign students are finding it extremely difficult to gain entry into the US, the UK and Australia as visa rules got tighter.
In terms of the crippling US trade tariffs on the rest of the world, a 90-day pause was announced, which should end around June 30, while the US-China 90-day pause would end around August 9.
As I reflected on these global economic and political changes, Seeni Bola, my ex-banker friend (so named by friends after he once boasted that other banks were handling ‘seeni bola’ deposits compared to his bank), called on the home phone. “I say, what is happening to the once-fiery Trump? He has suddenly become conciliatory to the world economic order,” he said.
“I am not sure whether he has backed down after imposing huge import tariffs on countries including Sri Lanka (we were affected the worst – apart from China – with 44 per cent taxes); or is he playing some game to show the world who is the boss,” I asked.
“What do you mean?” he asked. “Well is he trying to be a ‘nice guy’ after threatening the world with crippling import taxes, and now showing the world that he is ‘humane’,” I said.
“Maybe but Sri Lanka is still not out of the woods as we need to come up with a new trade deal before the 90-day pause ends,” he said. “The US agreement with China, trawling back on the original planned high import duties on both sides, means Trump is willing to go back on his initial threat. This is good news for Sri Lanka as it provides a glimmer of hope that the 44 per cent import duty could be adjusted to more favourable rates,” I said. “Trump seems to be playing a different trump card compared to his earlier outburst on trade tariffs,” laughed Seeni Bola.
In the first round of trade negotiations between Sri Lanka and the US, Sri Lanka presented a set of proposals to the US side which included reducing import tariffs that the US is subject to. US trade officials say Sri Lanka imposes an 88 per cent tax on US goods. Sri Lanka has also agreed to import more goods from the US including fuel to reduce the trade deficit which is heavily in favour of Sri Lanka. Sri Lanka officials were preparing for a second round of talks in Washington.
According to official data, trade between the two countries is heavily in favour of Sri Lanka which exports primarily garments and sea food among other items. US exports to Sri Lanka in 2024 totalled US$368.2 million, while Sri Lanka’s exports to the US were $3 billion in the same year.
Trump is on a whistle-stop tour of three West Asian countries – where he is drumming up support for US policies and trade – while at the same time his team is in trade negotiations with Chinese officials. Once again in ‘accommodating’ mode, he has said that the US doesn’t want to impose tariffs that would affect Chinese workers and businesses which are primarily exporting to the US. Will he stick to his words?
On Monday, May 12, the US and China agreed to cut their massive recent tariffs, restarting stalled trade between the world’s two biggest economies and setting off a rally in global financial markets, according to a report by AP news agency. A 90-day pause in the imposition of the earlier tariffs was announced by both sides.
US Trade Representative Jamieson Greer was quoted in the report as saying that the US agreed to drop the 145 per cent tax Trump imposed last month to 30 per cent. China agreed to lower its tariff rate on US goods to 10 per cent from 125 per cent.
Greer and Treasury Secretary Scott Bessent announced the tariff reductions at a news conference in Geneva, where the US-China talks were being held and would continue. “The officials struck a positive tone as they said the two sides had set up consultations to continue discussing their trade issues. Bessent said that the triple-digit tariffs the two countries imposed on each other last month – in an escalation of tensions Trump started – amounted to ‘the equivalent of an embargo and neither side wants that. We do want trade’,’’ the AP report said.
The 30 per cent levy that America is now imposing on Chinese goods includes an existing 20 per cent tariff intended to pressure China into doing more to prevent the synthetic opioid fentanyl from entering the US. It also includes the same 10 per cent ‘baseline’ tariff Trump has slapped on imports from most of the world’s countries, the report said.
At this point I was coming to the end of my column but, as always, I needed to find out what the trio was discussing in the hope it would add to the discussion in this column. It was, however, on a different topic but a relevant one in today’s governance structures.
“Den ara hangila hitapu janapriya tuition guruwaraya ara lamayekuta hirihara karupu, ath-adanguwata arang apa deela (A popular tutor who was on the run after assaulting a student, has been arrested but given bail),” said Serapina. “Ekata wada loku prashney wenney, naduwa saptamber walata kal daala thiyena eka, langa dinayak denney nathuwa. Eh usawi wala nadu goda gahila thiyena nisa wenna athi (The bigger issue is that the case has been postponed to September instead of an early date, which may be because the courts are overloaded with cases),” added Mabel Rasthiyadu while her colleague Kussi Amma Sera said that stiff penalties should be imposed in child abuse cases.
Well as we head off for another ‘week’ of excitement, our wish-list is that given the positives of the US-China talks, our talks with the US would also end on a positive note, bringing huge relief to Sri Lankan exporters. And, the hope that the unpredictable Trump would keep to this word (in the US-China trade deal), which would be a source of encouragement for a Sri Lanka- US deal.
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