How can the Philippines cope with the unpredictability of US President Donald Trump, who has upended the rules-based global trading system with a tariff war he is waging against scores of countries?

“We cannot predict what Trump will be doing next [during his second four-year term]. We can’t rely on the US to maintain rules-based trade,’’ University of the Philippines School of Economics (UPSE) Prof. Toby Monsod said recently.  

Taking that as a given, she said, “how do we move forward?’’ 

Speaking in an episode of the podcast “Chikahan with [UPSE] Prof. Cielo Magno” that featured a discussion on the effects of the “Trump tariffs” on the Philippines, Monsod suggested the steps that could be taken. She also said Filipinos should make their views on the issue known, particularly through the May elections.

She said the country should “stop obsessing” with its exports to the United States which, she noted, accounted for 17% of its total exports and just 10% of its total trade (imports and exports). 

Globally, the share of US trade is also 17%.

“There’s another 83% that doesn’t involve the US,” the economist said. “The rest of the world is leveraged here if we don’t panic.”

Regional integration

Monsod said the Philippines should look at other markets and supply chains for opportunities, “not to steal from someone else but to build regional integration.”

She said trade with the Association of Southeast Asian Nations (Asean) should be strengthened: “That could be a more predictable vision.’’ 

Asean consists of the Philippines, Indonesia, Singapore, Malaysia, Thailand, Brunei, Vietnam, Cambodia, Laos and Myanmar. The 10 member-states had a combined population of 673 million in 2022, making Asean the world’s third most populous region after India and China.

In the third week of April, Asean economic ministers were scheduled to hold a special meeting to discuss ways of boosting regional trade.

Lawyer Bob Herrera-Lim, also a guest on the podcast, said the Philippines should look at what Vietnam, Singapore and Malaysia would be doing and learn from it. 

Prime Minister Lawrence Wong of Singapore has announced that the city-state will form a national task force to support businesses and workers in response to new US tariffs that could slow growth and impact jobs and wages.

Wong has called Trump’s approach a rejection of World Trade Organization (WTO) principles, such as the most favored nation rule that obliges every member to treat all other members equally.

90-day pause

Before Trump suspended the steep tariffs just hours after they took effect, he had slapped Laos a 48% rate; Vietnam, 46%; Myanmar, 44%; Thailand, 36%; Indonesia, 32%; Malaysia, 24%; Brunei, 24%; the Philippines 17%; and Singapore, 10%.

The higher tariffs on imports from 57 countries had been scheduled to take effect on April 9 but were suspended for 90 days for all countries except China. The 10% minimum tariff, on top of the 25% tariffs that Trump has imposed on cars, steel and aluminum, remains in effect.

The suspension came amid tanking US stocks, selloff of US government bonds, weakening of the dollar, and fears of a global recession.

 “The Vietnamese are moving quickly and the Singaporeans will have a long-term view,’’ Herrera-Lim said. “Let’s list down all that they would be doing and let’s think which of these will work for us and how we can work with them.”

Right now, the political system in the Philippines is slow-moving, Herrera-Lim said. He called on the academe, businesspeople, and those with media platforms such as columnists to present proposals to address the problem posed by higher tariffs.

Monsod acknowledged that no one has the answer at this time. “To come up with a real strategic plan [we have] to put all our heads together,” she said. “Academe has a role to play but it doesn’t know everything. Government has a role and it has to step up. It has a coordinating role that no one can replicate.”

Call to voters

“However,” Monsod pointed out, “as citizens, we have the power to make our views known, but also through elections.” 

She expressed the hope that voters in the May midterm elections would consider the tariff issue in choosing the candidates for the Senate and the House of Representatives.

“I don’t think they understand what’s going on now,” she said in reference to more than half of the senatorial candidates predicted to make it to the Top 12. 

Monsod said the tariff issue should be brought to the provincial, city and town levels, as every province has overseas Filipino workers. 

OFWs may lose their jobs should trade contract, demand for crude oil drop, and the economies of their host countries weaken. But nurses may not be affected as demand for medical services overseas will continue, according to Herrera-Lim.

Said Monsod: “What are we going to do in the province and city?” 

Herrera-Lim said the provinces that would be hurt most in Trump’s tariff war are Batangas, Laguna and the rest of the provinces in Calabarzon, as well as Cebu. These provinces host factories that export electronic devices, integrated circuits and other products to the United States and other countries.

Everyone loses

Monsod and Herrera-Lim agreed that everyone loses in Trump’s tariff war and that everyone is affected because prices of imported goods in the United States and elsewhere will rise. (A tariff is a tax on imported goods and, therefore, on consumers who need to purchase these products.) 

The 17% tariff that Trump has imposed on Philippine exports to the United States used to be zero. At that tariff level, demand for Philippine exports in the United States could go down, according to Monsod. 

She said Trump’s expectation that manufacturing would be revived in the United States and more jobs would be created because of the tariffs may not happen. 

Manufacturing in the United States also depends on imported materials whose prices would surely rise. So, the cost of US local production would also go up, and there is no assurance that manufacturing jobs would expand. Trump, however, claims that the tariff is a tax on the other side and will earn revenue for the United States.

Herrera-Lim said Trump won the presidency because of the support of workers who lost their jobs when factories transferred to China and other countries where the cost of labor is low. 

The loss of jobs meant that the workers’ living standard declined, Herrera-Lim said. A job at a factory or car plant allowed American workers to buy a house, send their children to college and generally maintain a middle-class lifestyle. Not anymore, he said, as they have not been able to find new jobs that pay the same wages as before. 

These people are among the supporters of Trump and are against globalization, according to Herrera-Lim.

Sharing the fruits

But Monsod said the problem is not globalization per se but the sharing of its fruits.  “The approaches were lacking in ensuring the redistribution of the gains of trade,” she said.

High tariffs are being revived in the United States because many Americans are not benefitting from the WTO program that governs international trade, which is characterized by reduced or no tariffs, she said. 

However, she noted, the tariff wars of the 1930s led to the Great Depression.

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