Trump’s Tariffs Demonstrate the Failure of Neoliberalism and the Need to Build a New International Economic Order

On 2 April 2025, US President Donald Trump declared ‘Liberation Day’ as he unleashed a wave of protectionist tariffs. These tariffs have hit some of the poorest countries in the world, including a 44% tariff on Sri Lanka.

Since Sri Lanka’s leaders have made the economy overly dependent on the US, these tariffs will affect the country and its workforce badly. Around 23% of Sri Lanka exports go to the US. Around 38% of Sri Lanka’s biggest export, apparel and garments, goes to the US. Therefore, the 350,000 workers directly employed in this sector will face uncertainty, loss of income, and unemployment.

While such protectionism should have been anticipated by the present government, no amount of negotiating could have changed the tariff rate as it is based on an irrational formula devised by the Trump administration. The US will use these tariffs in order to extract economic and political concessions from the country. All progressive forces must remain vigilant about this.

The only solution is to break from away from economic dependence on the US market, invest in domestic industrial capacity, and contribute to building a new international economic order with the Global South.

Changing World Order

Trump’s so-called ‘reciprocal tariffs’ have to be understood in the context of historic transformations happening in the world economy. The balance of economic power is shifting decisively toward the Global South, with China and BRICS at the vanguard of this transformation.

China overtook Japan to become the second largest world economy in 2010. In 2014, it surpassed the US economy in terms of GDP purchasing power parity. It now contributes around 32% of manufacturing output and leads in high-tech sectors such as new energy.

The 2008 financial crisis signalled the weakness of the US-led neoliberal order. This led to the formation of BRICS in 2009, which has now expanded to 10 member states and 9 partner states that together comprise more than 29% of world GDP and 54% of the world population. China responded to the crisis through investment stimulus in the form of the Belt and Road Initiative.

Faced with this reality, the US ruling class have been increasingly unable to rule in the old way, engaging in hybrid wars and unilateral coercive measures. The Biden administration sought to weaken Russia militarily and economically by dragging it into a war in Ukraine. The Global North froze around 300 billion US dollars’ worth of Russian sovereign funds.

The failure of the proxy war in Ukraine has led to Trump proposing a ceasefire and attempting to win over Russia in order to isolate its neighbour and close partner China. However, this tactic has led to heightened contradictions between the US and the European Union.

Despite presenting himself as an anti-war candidate, the Trump administration has been intensifying the genocide in Gaza and enabling attacks on Syria and Yemen, which is a direct provocation for Iran. This is a dangerous situation for Asia. The US has now brought stealth bombers to the Diego Garcia base in the occupied Chagos Islands in the Indian Ocean in order to attack Yemen.

Moves by successive US administrations since 2008 have only served to further undermine US leadership over the global economy and fan the flames of war across the world. Trump’s tariffs are part of this pattern.

Build a New International Economic Order

Today, the moral bankruptcy of imperialism is plain to see. The writing is written on the wall with the blood of over 50,000 Palestinians murdered by Israel with the support and complicity of the US and EU.

The inability of neoliberalism and the Bretton Woods Institutions to deliver development to the majority of people in the Global South has also become undeniable. According to the UN, developing countries owe a collective 11.4 trillion US dollars in external debt. 3.3 billion people are living in countries that spend more on interest payment than education and health.

In this context, Sri Lanka, which was one of the first guinea pigs of neoliberalism, must decisively break from this system. It is a great disappointment that the present government reneged on its campaign promise of renegotiating with the IMF. It is still not too late to formulate an industrial and investment plan for the country, and speak to partners and institutions in the Global South.

The main political parties in Sri Lanka remain either clueless or silent about the tectonic changes in the global economy and what they mean for the country and its people. The current NPP government also appears unable or unwilling to educate the people about the current historical conjuncture.

The rise of BRICS, the Belt and Road Initiative (BRI), and other cooperative frameworks signals the possible emergence of an alternative economic order, challenging the outdated Bretton Woods system dominated by Western financial institutions. Sri Lanka must be a part of this process.

Previous efforts like the Bandung Conference, Non-Aligned Movement, and G77 were constrained by an unfavourable balance of power. Today, the objective conditions are changing. The rise of the Global South is irreversibleand we must seize this moment to forge a more democratic world order.

International Department

18 April 2025