Two Sides and Sri Lanka

The implications of Trump's potential return to the White House present complex challenges for global trade, particularly for Sri Lanka. Trump's famous declaration that "Tariffs" is the most beautiful word in English underscores his protectionist stance, which would significantly impact international trade relations. His "transaction diplomacy" approach views international relations primarily through the lens of deal-making, potentially reshaping global trade dynamics.

In the European context, the relationship between the US and EU presents particular challenges. As the US's largest trading partner, any tariffs imposed by Trump on EU goods would likely trigger retaliatory measures. Such a trade war would have cascading effects on Sri Lanka, given that both the US and EU are Sri Lanka's primary export markets. The situation is further complicated by Europe's current immigration crisis and the rise of right-wing nationalist governments, which may lead to more protectionist policies, with the EU prioritizing its internal markets over international trade relationships.

The Chinese situation presents even more complex challenges. Trump's proposed 60% tariffs on Chinese goods would have devastating effects not only on US markets but on global trade as a whole. As the world's second-largest trading nation and a production-focused economy, China's response to such tariffs would reshape global trade patterns. While the US has evolved into more of a consumer economy, China would likely seek alternative markets in the EU, South Asia, East Asia, and Africa. This shift would directly impact Sri Lanka, particularly in the garments sector, where Chinese imports play a crucial role. Sri Lankan exports would face pressure on two fronts: from US tariffs and from EU market adjustments, while simultaneously dealing with higher prices for Chinese imports.

However, this situation could present opportunities. Chinese companies seeking to avoid US tariffs might relocate their production facilities to countries with cheaper labor costs. While Sri Lanka could potentially attract such investments, countries like India and Bangladesh currently have more structured policies to attract such relocations.

China's response to these challenges demonstrates their pragmatic approach to economic policy. During the previous Trump administration, while Washington's tariffs did impact Chinese trade, the greater economic damage was felt by the US economy. China's retaliatory tariffs were strategically targeted at US products, while simultaneously expanding into Russian, South Asian, and African markets. The recent development of zero tariffs for Least Developed Countries (LDCs) indicates China's strategy to cultivate new markets and foster cooperation within the Global South.

For Sri Lanka, this evolving situation suggests the need for strategic free trade agreements, particularly with China and India. While a free trade agreement with India already exists, Sri Lankan products currently lack competitiveness in these markets. Achieving technological advancement requires foreign direct investment, potentially from Chinese and Thai sources. Singapore and Thailand represent important potential partners in this regional geopolitical dynamic of multipolar power politics.

The recent US court ruling regarding Adani adds another layer of complexity to these geopolitical dynamics. While Adani is technically an independent investment group, they play a significant role in the BJP government's geopolitical investment strategy. The US court ruling could be interpreted as a Washington move to create legal complications for both Trump and Modi. This situation parallels developments in the Ukraine-Russia conflict, where Biden's authorization of long-range missiles for Ukraine potentially complicates Trump's future diplomatic options. Any escalation in the Ukraine-Russian war could negatively impact Sri Lanka's tourism sector.

The AKD government's reconsideration of the Adani wind project, after initially vowing to stop it, reflects these complex dynamics. With Kenya halting their Adani deal following the court case announcement, the NPP government's decision becomes increasingly significant. Sri Lanka's need for investment in renewable energy, particularly given China's prominence in this sector, creates additional strategic considerations. While the JVP/NPP government appears aligned with US Indo-Pacific strategy, seeking Washington's help with energy needs could invite unnecessary geopolitical tensions. One potential solution might be to engage with Singapore, which maintains strong relationships with Chinese green tech industries, potentially providing both technological development and political balance.

Modern geopolitics and geoeconomics have become significantly more complex than during the bipolar era. For Sri Lanka, the new government must address these challenges strategically, prioritizing foreign policy and trade over domestic politics. In a world where technology and political dynamics are changing rapidly, Sri Lanka's economic and political development lags behind. The situation demands pragmatic, bold leadership capable of navigating these complex international waters effectively.