"Experts should look elsewhere for the explanations."
"Experts should look elsewhere for the explanations."
The phrase “trade war” invariably appears in assessments of the Philippine economy’s performance during the incumbency of US President Donald Trump and in evaluations of its prospects in the near term. “Trade war” refers to the succession of tariff actions that Mr. Trump has taken against China and a long list of major US trade partners. The latest American tariff action against the world’s No. 2 economy has been to increase the tariffs on Chinese exports with an aggregate value of $150 billion.
The assessments and evaluations point to the “trade war” as one of the causes of the recent deterioration in the performance of the Philippine economy—GDP (gross domestic product) grew by a lower-than-expected 5.6 percent in 2019’s first semester—and the economy’s less bullish prospects in the near term. By raising US tariffs on exports of numerous countries, Donald Trump has hurt Philippine external trade and caused a decline in this country’s economic performance, the assessors and evaluators claim.
How so?
First, let’s look at the import side of this country’s external-trade ledger. The situation has not been changed by the US tariff increases. The increases have been aimed at the exports to the US of China, the European Union countries, Canada, Mexico and one or two other countries—disliked by Donald Trump. They have not been aimed at goods involved in Philippine American trade. The prices of US exports to the Philippines have not been affected by the “trade war” per se. If they have risen, it has not been because of US tariff increases.
If the pieces of Philippine imports from the US have not been affected by Donald Trump’s tariff increases, how can the “trade war” be said to have adversely affected the Philippine economy on the imports-from-the-US side? Import volume is, of course, another matter, and Philippine imports from the US have risen sharply since 2016 in the wake of the Duterte administration’s Build, Build, Build program.
Now let’s take a look at the opposite side of the Philippine-American trade ledger. The Philippines has not been on the list of targets of Donald Trump’s higher-tariffs campaign. As a result, this country’s exports to the US—principally semi-conductors and related electronic products, coconut oil and other coconut products, copper concentrate, nickel ore and other mineral products—have enjoyed stable treatment at the hands of US tariff policymakers since the start of the Trump administration. Philippine export trade with the US has not been a victim of President Trump’s tariff rampage.
Of course, if the situation were different, if exports from this country had been at the receiving end of Donald Trump’s 10-percent or 25-percent or 30-percent tariff increases, the “trade war” would really have caused grave damage to an economy whose export trade is chronically weak. In 2018, the Philippines incurred a deficit exceeding $42 billion in its merchandise-trade account.
True, some of this country’s trade partners have seen their import capabilities diminished by reductions in their export incomes in the Trump era. But it is highly improbable that all or most of the Philippines’ other major trade partners—China, Japan, United Kingdom, Netherlands and South Korea—will cut their imports from the Philippines significantly because of US tariff increases. The “trade war” has adversely affected neither this country’s import trade nor its export trade. So “trade war” should not be included in a list of alleged causes of the recent decline in the Philippine economy’s performance of the darkening of its near-term prospects.
People whose job it is to determine the cause or causes of the Philippine economy’s recent performance and of the economy’s near-term prospects should look elsewhere for the explanations.