Committee for the Abolition of Illegitimate Debt

’America first’ or economic fallout? Unpacking Trump’s tariff war

Trump’s decision to impose sweeping tariffs, even on ‘friendly countries’ like Sri Lanka, is best understood through the lens of right-wing populism and the structural crisis of U.S. capitalism. His political strategy has consistently relied on right-wing populism, which thrives on nationalist rhetoric, economic protectionism, and portraying foreign nations, whether allies or rivals, as economic threats to American workers. By imposing tariffs indiscriminately, Trump reinforces his image as a defender of U.S. manufacturing and jobs in the face of globalisation. He has capitalised on popular anger, particularly among his working-class voter base, while conveniently ignoring the role played by powerful American businesses/companies in exploiting free trade rules to offshore their operations in pursuit of higher profits, a practice that is a direct result of capitalist incentives and the neoliberal economic policies that have encouraged such behaviours (O’Connor 2020). Moreover, Trump has distorted the public’s understanding of the issue by framing it as if other countries were ‘taking advantage of’ and ‘ripping off’ the United States (Dillon 2018). This tariff war allows Trump to maintain political legitimacy by demonstrating his commitment to ‘America First’ policies, even if they disrupt long-standing economic relationships (The White House 2025).

From a systemic perspective, the tariff war can also be understood within the logic of capital, particularly the tendency of the rate of profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. to fall, a key contradiction in capitalism identified by Marxist economists (Harvey 2010). Over the past several decades, U.S. capitalism has faced profitability crises as results of outsourcing manufacturing to cheaper labour markets, technological advancement, etc., and the country has continued to rely increasingly on financial speculation, debt-driven growth, and geopolitical strategies to sustain profits (Foster and McChesney 2012). In this context, protectionist tariffs function as an attempt to reconfigure global trade in favour of U.S. capital by extracting better trade terms through economic coercion. Even tariffs on friendly nations serve this broader strategy: they pressure foreign exporters to absorb costs or negotiate concessions that ultimately benefit U.S. capital.

When neoliberal dreams meet Trump’s tariff nightmare

Trump’s tariff war, especially the harsh 44% tariff on Sri Lanka’s exports, vindicates left-wing criticisms of the National People’s Power (NPP) government’s reliance on IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org -backed neoliberal prescriptions and an export-led growth model. The NPP government’s 2025 Budget forecast depends heavily on a recovery in export revenues, especially from the apparel sector, to support fiscal consolidation and fund essential public services. According to Sri Lanka’s latest trade and export policy, the government aims to achieve an annual export revenue of 18.2 billion USD by 2025, with the apparel sector projected to be the main driver, targeting 5.2 billion USD in earnings (Rizkiya 2025). However, with Sri Lanka’s biggest apparel market now effectively closed off by a 44% tariff, those export projections are rapidly becoming unrealistic. This confirms what the Left has long argued: that an economy tied to external demand and global capital flows is inherently unstable, particularly when it is subjected to imperialist trade policies and the whims of powerful countries like the U.S. (Chang 2002; Rodrik 2007). Instead of insulating the country from external shocks, the IMF’s neoliberal export-driven framework has made Sri Lanka more dependent and vulnerable.

Moreover, the IMF programme is predicated on restructuring Sri Lanka’s sovereign debt Sovereign debt Government debts or debts guaranteed by the government. , largely held by foreign creditors. To gain their confidence, the government has been forced to commit to ambitious fiscal targets through increased revenues from exports (Fitch Wire 2025). However, with those revenues now threatened, Sri Lanka risks failing to meet its budgetary and debt servicing goals, jeopardising the restructuring process and risking more instability or even default. This highlights another core left-wing critique: the loss of sovereignty under IMF-led restructuring, where domestic priorities are subordinated to the demands of creditors and global markets (Stiglitz 2002)

Conclusion

Trump’s tariff war does more than cause damage to Sri Lanka’s export economy. It exposes the deep, structural flaws of IMF-led neoliberalism. As Ha-Joon Chang (2002) argues, wealthy countries like Britain and the United States industrialised through heavy use of protectionist policies and state intervention, only to later ‘kick away the ladder’ and put pressure on developing countries to adopt free trade. Chang rejects the neoliberal claim that ‘There Is No Alternative’, stressing instead that globalisation and economic development are shaped more by policy decisions than by technological inevitability (Chang 2007).

The Left builds on this critique by arguing that successful development stories have not emerged from free-market orthodoxy, but from a pragmatic mix of protectionism, state-owned enterprises, and strategic flexibility. For instance, South Korea’s rapid development involved strong government direction, industrial policy, and a selective approach to globalisation (Chang 2002). They also reject trickle-down economics, which Thomas Piketty (2014) has shown to deepen inequality rather than promote shared prosperity. Dani Rodrik (2007) similarly demonstrates that countries that opened their economies gradually and on their own terms experienced more stable and equitable development than those that followed full-blown liberalisation under IMF or World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

pressure.

Critics like Stiglitz (2002) and Chang (2007) warn that free trade, in its current form, tends to prioritise short-term gains in consumption while undermining the structural foundations of long-term development. It often exacerbates inequality and erodes domestic industries. At the same time, international financial institutions such as the IMF apply a double standard: while advanced economies deploy fiscal stimulus and monetary expansion during economic downturns, developing countries are pressured into austerity. These measures, such as raising interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. and cutting down on public spending would directly suppress investment, growth, and employment (Stiglitz 2002; Weisbrot et al. 2009).

In this light, the ‘Liberation Day’ tariffs on Sri Lanka are not just an economic occurrence but a political turning point. They lay bare how externally dictated and vulnerable the current neoliberal model truly is. It is a wake-up call for the National People’s Power government. The Left’s long-standing argument now resonates more urgently than ever: real recovery cannot come from chasing volatile export markets or depending on foreign loans. Instead, it requires rebuilding economic sovereignty through domestic production, food and energy security, and democratic control over fiscal policy.

In a world increasingly shaped by protectionism and economic nationalism, Sri Lanka must rethink its path. The pursuit of export-led growth at the expense of national resilience is no longer defensible. A development model rooted in equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. , sustainability, and autonomy is not just possible, it is crucial.

References

Chang, Ha-Joon. (2002). Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press.

Chang, Ha-Joon. (2007). Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. New York: Bloomsbury Press.

Dillon, Sara A. (2018). “Getting the ‘message’ on free trade: Globalization, jobs and the world according to Trump.” Santa Clara Journal of International Law 16 (2): 1-44. Available at https://digitalcommons.law.scu.edu/scujil/vol16/iss2/1/

Fitch Wire. (2025). “Sri Lanka’s revenue raising drive key to credit profile.” Fitch Ratings (19 February). Accessed on 04/04/2025. Available at https://www.fitchratings.com/research/sovereigns/sri-lankas-revenue-raising-drive-key-to-credit-profile-19-02-2025

Foster, John Bellamy, and McChesney, Robert W. (2012). The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. New York: Monthly Review Press.

Harvey, D. (2010). The Enigma of Capital and the Crises of Capitalism. New York: Oxford University Press.

O’Connor, Brendon. (2020). “Who exactly is Trump’s ‘base’? Why white, working-class voters could be key to the US election.” The Conversation (28 October): https://theconversation.com/who-exactly-is-trumps-base-why-white-working-class-voters-could-be-key-to-the-us-election-147267

Piketty, T. (2014). Capital in the Twenty-First Century. Translated by Arthur Goldhammer. London: Harvard University Press.

Rizkiya, Nuzla. (2025). “Sri Lanka aims US$ 18.2bn in export revenue for 2025.” Daily Mirror (17 January): https://www.dailymirror.lk/business-news/Sri-Lanka-aims-US-18-2bn-in-export-revenue-for-2025/273-300272

Rodrik, Dani. (2007). One Economics, Many Recipes: Globalization, Institutions, and Economic Growth. New Jersey: Princeton University Press.

Sri Lanka Export Development Board. (2025). “Sri Lankan apparel industry capability.” Accessed on 05/04/2025. Available at https://www.srilankabusiness.com/apparel/about/industry-capability.html?utm

Stiglitz, Joseph E. (2002). Globalization and Its Discontents. New York: W.W. Norton & Company.

Weisbrot, Mark, Rebecca Ray, Jake Johnston, Jose Antonio Cordero, and Juan Antonio Montecino. (2009). IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries. Washington, D. C.: Center for Economic and Policy Research (CEPR). Available at https://cepr.net/publications/imf-supported-macroeconomic-policies-and-the-world-recession-a-look-at-forty-one-borrowing-countries/

The White House. (2025). “America First Investment Policy.” (21 February). Accessed on 04/04/2025. Available at https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/