Capital Market Optimism amidst Trump Tariff uncertainty -Did we pass the litmus test?

Discussion with Dilusha Gamage

( Assistant General Manager, Business Development &

Corporate Communications, Ambeon Securities )

1. What was the initial shock, and how did financial markets react to the tariffs imposed by President Trump?

When the Trump administration first announced a steep 44% tariff on goods from Sri Lanka,

the capital markets didn’t take it lightly. Not just here, but globally, investors were cautious.

The apparel sector, a major part of our exports to the US, was especially vulnerable.

Naturally, negative sentiment emerged as many listed companies exposed to the US markets faced uncertainty. Despite this early setback, things began to change as negotiations progressed. The final tariff rate settled at 20%, which, while higher than before, positioned Sri Lanka competitively in the region. This more moderate tariff helped ease fears and restore investor confidence.

2. How did the financial markets recover and reach new highs following the initial impact of President Trump’s tariffs?

Following the announcement of the 20% tariff, the stock market responded quite positively.

Investors did not panic as many had feared but instead took the news in stride. In fact, the

market quickly began to recover. We’ve since seen record-breaking moments ̶like the stock market index reaching 20,000 for the first time ever. Export-focused stocks also gained confidence as the tariff adjustments clarified the playing field. It was encouraging to see how the markets adapted quickly and found optimism amid uncertainty.

3. What were the sector-specific impacts of Trump’s tariffs on the apparel and technology industries?

The industries feeling the brunt of the tariff changes were primarily apparel and certain

export-oriented companies. These sectors saw some initial negative investor sentiments.

However, as the tariff dilemma was resolved, positive sentiment returned. Regarding

technology companies, the impact was not as significant. That’s because most

tech companies here are local and not listed on the stock exchange. So, while you might

have heard about hiring pauses in the tech sector, these effects didn’t visibly impact the

capital markets.

4. How did big investors and small investors behave differently in response to President Trump’s tariffs?

One interesting point is how different types of investors responded to this tariff issue.

Surprisingly, there wasn’t a big difference between large institutional investors and small

retail investors. In recent years, thanks to digitization and low interest rates, many new

retail investors have entered the market. Since fixed income options offer very low returns,

stocks became a much more attractive avenue. Both big and small investors reacted

similarly to tariff news, which shows a maturing market with more informed participants.

5. How does trusted advice help in handling misinformation effectively?

With so much information and misinformation floating around, especially on social

media, I was curious about how investors make careful decisions. Stockbroking firms and

investment advisors operate under strict regulations. Our job is to provide clients with

advice rooted in thorough research and reliable data. However, if an

investor chooses to follow unverified sources, misinformation can take hold.

Therefore, I strongly advise investors to rely on registered investment advisors and official

reports from stockbroking companies, the stock exchange, and regulatory bodies. Everyone has access to financial statements and market information, so it’s crucial to be cautious about where your advice comes from.

6. What’s your Final Thought or Learning from this?

This experience with the Trump tariffs has tested our capital markets, and in many ways,

we’ve passed the test. While the early news was unsettling, we saw remarkable resilience

from both markets and investors. Our competitive position in the region and the increasing

participation of informed retail investors add strength to the market’s foundation.