In the unpredictable theatre of global trade wars, US President Donald Trump’s announcement of a 90-day suspension on tariffs imposed on multiple nations—except China—represents an uncertain “ceasefire”. This brief hiatus signals not the end but merely a deceptive calm.
China, notably excluded from this pause, faces an unprecedented tariff escalation to 125 percent. Beijing responded promptly and defiantly, raising tariffs on American imports to 84 percent. This escalatory tit-for-tat is more than symbolic posturing; it threatens to rupture trade ties that have anchored global economic stability for decades. This situation has become an economic game that few can win, but all will pay for.
This showdown has already triggered volatility in global markets. American stocks plunged initially and, though buoyed temporarily by the tariff pause, investor confidence remains fragile. The broader implication is clear: prolonged uncertainty is now the “new normal” in global trade.
Sri Lanka was blindsided by the sudden imposition of a 44 percent tariff on its exports to the United States, one of its largest trading partners. Already battered by severe economic turmoil following its debt crisis, Sri Lanka now faces further barriers to economic recovery. Its apparel industry, employing thousands, risks devastating losses as American buyers inevitably seek alternatives in tariff-friendly markets.
Sri Lanka’s vulnerability underscores a critical truth faced by small economies globally: when great powers clash, it is often the smallest who suffer disproportionately. Sri Lanka’s case highlights a major flaw in the current global trading system: smaller countries lack meaningful leverage or bargaining power to negotiate with economic giants like the United States.
Individually, these smaller economies wield little clout, making them vulnerable to external economic shocks. However, this predicament also offers a powerful lesson- solidarity and collective negotiation can amplify their voice significantly.
Small nations must now recognise the urgent need to come together as cohesive regional blocs to enhance their negotiating positions. South Asia, home to small yet strategically located economies, provides a clear example of both missed opportunities and potential solutions. The South Asian Association for Regional Cooperation (SAARC), set up almost four decades ago to foster regional cooperation, had the potential to offer these small countries a collective voice in global forums.
However, SAARC remains tragically underutilised, its effectiveness compromised by longstanding geopolitical rivalries, particularly between its two largest members, India and Pakistan. Had SAARC been effective, the region might have developed a unified economic front, allowing countries such as Sri Lanka and Bangladesh to collectively negotiate better terms and protections against the economic unilateralism practised by the Great Powers. By pooling their economic interests and aligning trade policies, SAARC nations could have provided a meaningful counterbalance to the disproportionate bargaining power of the US, China, and the European Union (EU).
Unfortunately, the reality is starkly different. Instead of unity, South Asian countries remain fragmented in their responses to external shocks, competing rather than cooperating. Bilateral trade agreements and isolated diplomacy have dominated the regional landscape, limiting each country’s ability to assert a stronger, collective position. Each nation remains individually exposed to the whims of global superpowers, vulnerable to sudden tariff hikes or unpredictable policy shifts.
The current crisis presents an opportunity to rethink regional diplomacy. The US-China trade war, symbolised by these unprecedented tariffs, underscores the urgent need for smaller nations to strengthen regional blocs and forge alliances capable of negotiating collectively. Regional cooperation must move beyond rhetoric and symbolic summits, becoming genuinely strategic, purposeful, and pragmatic. For South Asia, reviving and revitalising SAARC or developing a new mechanism for economic diplomacy is imperative.
A functional, united SAARC could collectively advocate for equitable trade practices and push back against unjustified unilateral economic actions. Such a regional coalition would not only offer economic protection but would also enhance political autonomy, enabling smaller nations to avoid becoming pawns in the power politics of larger nations. Strengthened regional economic cooperation could open new pathways for internal market integration, infrastructure development, and shared investment in critical sectors such as renewable energy.
While global giants clash and reorder the rules of international trade, small countries cannot afford to remain passive. They must actively cultivate stronger regional alliances, ensuring that when global tides shift, they can collectively weather the storms rather than being swept away individually. This approach demands diplomatic foresight, political courage, and the willingness to set aside historical grievances and rivalries for collective economic security.
President Trump’s recent pause in tariffs, though brief and selective, sends a clear message: global trade will remain volatile and unpredictable. As economic superpowers reset the terms of international commerce, smaller nations must learn the value of unity. For countries such as Sri Lanka, isolated strategies offer limited protection against global economic disruptions. Regional solidarity and collective bargaining are essential.
In the face of continuing economic turbulence, the revival and reinvigoration of regional frameworks such as SAARC become urgent necessities. South Asia’s small economies must seize this moment of vulnerability and transform it into an opportunity for regional solidarity, strength, and resilience. Only then will they have a fighting chance to ensure that in the global trade arena, their voices are heard and respected.
The current tariff pause is not the end but merely a respite before tensions resurface. The question for small countries is whether, during this lull, they can finally come together—shaping a collective future rather than becoming isolated casualties in an economic conflict not of their making.
