Abstract:
The shift in United States tax policy, particularly following the assumption of office by
President Donald Trump in 2025, has generated significant global economic repercussions,
with developing nations like Sri Lanka experiencing tangible impacts. This paper addresses the
problem of how unilateral changes in US taxation—especially tariffs and modifications to
international tax agreements—affect foreign economies by disrupting trade flows, altering
investment patterns, and influencing domestic fiscal policies. The central objective of this study
is to examine the implications of post-2025 US tax reforms on Sri Lanka’s economy, focusing
on areas such as trade competitiveness, foreign direct investment, and remittance dynamics.
Key research questions include: How do US tax reforms reshape trade and investment
relations with Sri Lanka? What mechanisms transmit these global fiscal changes to local
economic outcomes? And how is Sri Lanka adjusting its taxation framework in response to
emerging international standards? By utilizing both quantitative data analysis and qualitative
insights, the study explores the challenges Sri Lanka faces in mitigating adverse effects on local
businesses and economic growth, while also identifying potential opportunities for aligning
national policy with evolving global norms. The findings contribute to a nuanced
understanding of international economic interdependencies and provide evidence-based
recommendations for strategic policy responses that could enhance Sri Lanka’s resilience and
adaptability in the context of a shifting global fiscal landscape shaped by the post- Trump era
of US tax policy.
