April 03, Colombo (LNW): Sri Lanka’s currency may experience downward pressure following US President Donald Trump’s recent decision to impose a 44 per cent reciprocal tariff on Sri Lankan imports, according to currency dealers.
The executive order, which Trump characterised as a “discounted reciprocal tax,” aims to counteract what he claims to be an 88% tax burden on American goods entering Sri Lanka.
Trump justified the move as a necessary measure to address trade imbalances. Whilst the decision has sparked concerns within Sri Lanka’s financial sector, local currency dealers suggest the rupee’s immediate depreciation is primarily a reactionary move by certain banks seeking to cover short positions.
“There is currently limited importer demand for US dollars, but uncertainty about future trade relations has created some volatility,” a senior currency dealer noted.
Experts warn that the impact on the rupee could become more pronounced if Sri Lanka fails to negotiate a favourable resolution. Unlike major trading nations such as China and India, the United States maintains a trade surplus with Sri Lanka, meaning a higher tariff could lead to reduced dollar inflows into the country.
This scenario would place further strain on foreign exchange reserves and put the rupee under sustained pressure.
Market analysts are closely monitoring the situation, with many waiting for further clarification from the Trump administration regarding the extent and duration of the tariffs.
In the meantime, financial markets remain on edge as Sri Lanka assesses potential countermeasures to mitigate the economic fallout.
