The first salvo in President Donald Trumpâ€™s trade war isnâ€™t being heard too loudly in Sri Lankaâ€™s capital, where cranes tower over Chinese-funded construction projects across the capital.
Despite new tariffs and talk of an all-out dispute, a senior adviser to Sri Lankaâ€™s finance minister said during an interview in Colombo that he isnâ€™t too worried.
“I donâ€™t think thereâ€™s a lot of probability being placed on the possibility of it going into an out-and-out, global scale trade war,” said Deshal de Mel, an economic advisor in the finance ministry. “The rhetoric and the actuality in terms of policy — there will probably be a fairly significant gap.”
Far from obsessing about the supposed death of the liberal trading order, Sri Lanka is striking deals on its own. In January, it signed a free trade agreement with Singapore that includes investment and services. And itâ€™s currently negotiating a trade pact with China, its largest trading partner. Sri Lanka also hopes to conclude negotiations on an expanded trade deal with its much larger neighbor India in about a yearâ€™s time, de Mel said.
Sri Lankaâ€™s biggest trading partner is China at $4.5 billion, followed by India at $4.4 billion and the U.S. at $3.3 billion. Because the U.S. is Sri Lankaâ€™s largest export market, mainly for apparel, Washington runs a deficit of nearly $2.3 billion with Colombo, according to Bloomberg data.
The one risk to Sri Lanka is that the trade rhetoric hardens and the United States raises tariffs in other areas. If the U.S. raised tariffs on apparel, a key export for this South Asian nation, that would be “problematic,” de Mel said.
“If it continues expanding and proliferating into other products, then certainly it could be of material interest to Sri Lanka,” he said, adding thatâ€™s unlikely to happen. “Sri Lankaâ€™s not expecting too much to see major challenges to our key globally exported products right now.”