In a move that has sparked widespread controversy and alarm, U.S. President Donald Trump has announced a sweeping decision to raise import taxes on goods coming from many countries worldwide.
The new policy, imposing a steep tariff hike, has triggered immediate repercussions across the global economy, particularly affecting the fragile global supply chain and logistics sectors.
The policy, which increases average import taxes (from 11 percent to as high as 44 percent related to Sri Lanka), is being justified by the Trump-led administration to protect domestic industries and reduce the U.S. trade deficit. However, experts warn that the decision could create long-lasting disruption across international trade networks and pose severe economic threats to developed and developing nations.
Global supply chains—already strained by the aftereffects of the COVID-19 pandemic, geopolitical tensions, and climate-related disruptions—are now facing another shockwave. The new tariffs make it more expensive for companies to import goods into the U.S., leading to shipment delays as businesses reassess sourcing strategies, cost increases across production lines, and Inventory bottlenecks, especially in sectors like electronics, apparel, auto parts, and consumergoods.
Many multinational corporations have relied on just-in-time (JIT) supply chains. With this new tax burden, companies are forced to shift towards just-in-case models, increasing storage and warehousing needs while reducing efficiency.
Declining trade volumes
Declining trade volumes are expected to significantly affect the logistics and freight sectors, which include shipping lines, freight forwarders, air cargo operators, and last-mile delivery services.
“Tariff hikes of this scale create uncertainty and discourage international trade. That translates directly into fewer shipments, lower cargo volumes, and a slowdown in the global transport network,” said Maria Gonzalez, a global logistics analyst at Trans-Global Insights.
Ports, especially in Asia, Latin America, and Africa, will report lower export activity to the U.S., which could lead to reduced port revenues, layoffs in logistics companies, and underutilisation of transport infrastructure. The consequences could be devastating for developing nations like Sri Lanka, Vietnam, Bangladesh, and Kenya, which depend heavily on U.S. markets for exports of garments, electronics, tea, and rubber-based products.
Higher cost of entry
The higher cost of entry into the U.S. market may cause a significant loss in export revenue, forcing companies to either absorb the cost or risk losing their American clients. This could lead to Mass unemployment in export-driven sectors, a decline in foreign exchange reserves, rising inflation, and economic instability. Businesses are now rethinking their sourcing and trade routes to minimise exposure to U.S. tariffs. There is growing interest in regional trade agreements, Near-shoring or friend-shoring production to politically aligned countries, and increasing self-sufficiency in strategic sectors. However, these transitions take time, capital, and policy support, meaning short-term disruptions are inevitable.
The decision to sharply increase U.S. import taxes has destabilised global trade dynamics, with the most immediate and pronounced impacts felt across the supply chain and logistics ecosystems. While the long-term intent may be to strengthen domestic industry in the U.S., the short- and medium-term effects could lead to widespread disruptions, economic setbacks, and geopolitical tensions.
As the world adjusts to this new wave of trade protectionism, the future of global logistics will depend on how quickly and effectively businesses, governments, and international trade bodies respond to restore stability and confidence in the system.Had the Trump administration implemented tariffs based on production potential rather than targeting countries from a political and diplomatic standpoint, substantial economic gains might have replaced the current unrest in the United States.In other words, the U.S. government could have secured a political advantage by strategically raising import taxes on goods that can be produced domestically, thereby delivering significant economic benefits to local industries.
However, the imposition of a 104 percent tariff on essential consumer goods—particularly those imported from China—has triggered inflation, which could lead to severe economic and political repercussions. This concern is underscored by the growing protests across all 50 States in response to the rising import taxes.Given the mounting economic stress and intensifying dissent at home and abroad, President Trump may be compelled to reconsider the reciprocal tax policy.
The escalating domestic opposition—coupled with mounting pressure from global trade partners and multinational corporations—indicates that a recalibration of the tariff strategy is inevitable and necessary to prevent a deeper spiral of economic instability and diplomatic isolation.
By Dr. K.R.H. Lal Gunasekara
Faculty of Management Studies
Sabaragamuwa University of Sri Lanka
