Trump’s tariffs and the need for diversification of markets

In fact Trump’s threat to impose huge taxes on international competitors, be they allies, ideological foes or developing countries has had the effect of drowning out all other events taking place in the world

Today the most dominant topic of conversation media-wise, whether it be the BBC, CNN, rt.com, the Daily Mirror or the Ceylon Daily News, is US President Trump’s imposition of tariffs on goods entering the US. Trump believes the best way to protect American jobs and products over imported goods is to impose tariffs. He refers to this as leveling the playing field.

In fact Trump’s threat to impose huge taxes on international competitors, be they allies, ideological foes or developing countries has had the effect of drowning out all other events taking place in the world. Today Trump’s tariff antics has even taken the world’s attention away from Israel’s genocidal attacks on Palestinians.

During the past 670 days, Israel has killed over at least 57,762 civilian Palestinians, 137,656 others have been wounded. Israel has also imposed a blockade of food entering Gaza. According to a report last month by dozens of independent experts on hunger, it has plunged families in Gaza into extreme hunger. Half a million people in Gaza are now starving and the entire territory is at risk of famine.

These atrocities are now off media headlines. They have been replaced by Trump’s blanket 10% tariff on nearly all imports. Plus additional “reciprocal” tariffs of up to 40% on imports from all countries, in the belief foreign countries have taken advantage of the US for many years. He believes his tariffs, will trigger a US domestic economic boom. 

But will tariffs in fact protect jobs in the US?

Former US president Ronald Regan had quite the opposite point of view. Back in 1987 speaking on the same subject, Regan said tariffs were bad. He warned, while that tariffs appear to protect American jobs in the short term, the eventual fallout was industrial complacency, retaliatory trade wars, shrinking markets, and ultimately, mass job losses.

He (Regan) added that the US should learn from what occurred back in the protectionist era of the ‘30s. He added he was determined “to spare the American people the protectionist legislation that destroys prosperity.”

In the meantime,  Trump’s tariffs are posing an almost existential problem to developing countries like ours, just coming out of bankruptcy and dependent on exports to keep their economies afloat. Trump’s 30 percent tariff on exports from our country makes goods exported from Lanka to the US more expensive than those from our regional competitors. 

In turn, this will if practiced, lead to reduced purchase of Lankan exports to the US. In turn it will lead to factory closures at home and job losses especially in the garment manufacturing sector. 

Today, Lanka is grappling with a complex situation of malnutrition with a report by the World Bank indicating that 6.3 million Lankans are malnourished. This represents approximately 30% of the country’s population. 

Sri Lanka’s largest export market is the US. It accounted for 23% of the country’s total exports in January 2025, according to the Export Development Board. Making matters worse,  our country has still not repaid its external debt.

Unfortunately, we have not moved out of our traditional foreign currency earning fields. We mainly export primary products. Even where our most famous export – tea -  is concerned, only a single company has gone into secondary product production. 

In the face of these new emerging problems -- especially in the face a possible loss of the US market --  government and export oriented companies need to diversify markets, as well as invest in production of secondary products rather than exporting primary products. 

We also need to break into international market chains as well as produce parts of final goods.The economies of Vietnam and Cambodia have developed producing parts of a product. Our government,  too, needs to promote local enterprises to enter this field and invest time and money in this field.

The main lesson we as a country needs to learn, is not to depend on a single large market but expanding economic activity to multiple markets, reducing vulnerability to fluctuations in one specific market.