External developments always pose a threat to the Philippine economy and the current trade friction between the world’s two leading economic powerhouses—the United States and China—is no exception.
Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said the first-round impact of the trade war could be minimal, but its further escalation could be another story.
“... Looking at the items that will be affected... based on the initial list... that means aluminum, iron, steel. Our exports and imports from the US and from China are very negligible. That’s the first-round effect... no significant impact on us,” Guinigundo said.
“But if it reaches the second and third rounds, when economic performance of the countries involved like China, Japan and even the US is considered, then the impact could be more significant...,” Guinigundo said.
He said any “constriction” in trade could result in the country’s net exports to go down. He said negative net exports would eventually pull down economic growth.
He said the government’s move of diversifying the country’s export markets from its traditional trading partners was a good vital step to avoid the expected adverse impact of a full-blown trade war.
“... From our perspective, we just have to be ready. I think preparation is very critical. And we have been doing it, we have been trying to diversify the source of our imports and the markets for our exports,” he said.
“Export market has been diversified actually with veering away from US and Japan in favor of intra-Asean trade. That has become very important... Diversification of market both exports and imports of course, greater competitiveness among our exporters and importers and the rest of the industry,” Guinigundo said.
The US in July imposed a 25-percent border tax on $34 billion worth of Chinese goods shipped into the US. In response, China levied tariffs on $34 billion worth of imports from America.
Economists said the tariffs and counter-tariffs could have a major negative impact on consumers and global economies.
Bangko Sentral Governor Nestor Espenilla Jr. said any escalation in the ongoing trade friction between the US and China would do more harm than good because it would limit opportunities in the global trade environment.
Espenilla said if the situation worsened, the trade war could obviously affect the Philippines because the country had been trading with many other countries.
Finance Secretary Carlos Dominguez III echoed Espenilla’s observation.
But Espenilla expressed optimism the Philippines would remain resilient going forward despite these global developments, citing the Philippines’ solid and strong macroeconomic fundamentals.
Dominguez also cited the economy’s strength, namely the just implemented tax
reforms, increased foreign direct investments and a significant rise in public spending in the first two years of the Duterte administration.
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