WILL the US-China trade war take a toll on the Philippines? Far from it, Trade Secretary Ramon M. Lopez said, noting the country might even stand to benefit from the escalating economic tension between China and the United States.
In a text message to reporters, Lopez shrugged off fears that the Philippines is at the short end of the stick with China and the US going all out in their trade conflict. “The ongoing trade war by two major economies, [the] US and China, is not seen to have a major impact on the Philippines,” he said.
Lopez explained largely attributed his optimism to the trade deals the country has with the two superpowers. For one, Philippine exporters are enjoying duty-free importation of more than 3,500 goods to the US under the General System of Preference (GSP).
“[The] Philippines still currently enjoys GSP privilege with the US, covering 3,500 product lines that enter the US market at zero-percent duty. Moreover, we are enhancing trade arrangements with the US under the Trade and Investment Framework Agreement as a step toward a possible bilateral free-trade agreement [FTA],” Lopez said.
On the other hand, Manila, as a member of the Association of Southeast Asian Nations, is covered by the regional bloc’s FTA with Beijing. The trade agreement allows Asean member-states to export 90 percent of product lines to China at lower or zero-percent tariff, and vice versa, he added.
The trade chief said, “China is also showing its seriousness in helping balance its global trade surplus” with its decision to unilaterally slash most favored nation rates on footwear, headgear, kitchen supplies and apparel to 7.1 percent from 15.9 percent; cosmetics to 2.9 percent from 8.4 percent; washing machines and refrigerators to 8 percent from 20.5 percent; and processed food and mineral water to 6.9 percent from 15.2 percent—all starting on July 1.
Goodwill factor
Apart from the trade deals, Lopez said the Philippines will persist to benefit from China under the Duterte administration’s policy to establish warmer relations with the Asian superpower. “The goodwill established by [President Duterte] with [Chinese] President Xi Jinping continues to open up huge market opportunities for Philippine products to enter the China market,” he said.
China and the US have been going at it since January, and the White House added fuel to the fire on Friday by slapping an additional duty of 25 percent on $50 billion of imports from China. Tariffs on roughly $34 billion of Chinese goods will take effect on July 6, while stiffer duties on another $16 billion of products are up for review.
Beijing lined up retaliatory measures. It is planning to impose heavier tariffs on $50 billion of American goods, including beef, poultry, tobacco and cars.
Lopez believes this tit-for-tat will heavily impact on the respective consumers of the two economies. He said the DTI is now closely monitoring the situation to see if opportunities will arise from the trade war, such as manufacturers looking to relocate their operations.
“This will have a huge impact on the economies of the two countries, as their higher import costs will affect their respective consumers and imported inputs-using manufacturers,” Lopez said.
“This may also lead to moves by affected manufacturers to shift their production activities to other countries like the Philippines. [We are] also reviewing product lists—which ones the Philippines can supply,” the trade chief added.
US President Donald J. Trump in January also approved the imposition of 30-percent tariff on solar panels and 20 percent on washing machines. The Philippines can just brush off the additional duty on washing machines, Lopez argued, but not so easily the tariff on solar panels.
Solar panels
“For the Philippines, there is no impact for washing machines, but there is an impact for solar panels since [we have] one major exporter, Sunpower. The company has submitted a position for exemption,” Lopez said.
Based in Biñan, Laguna, Sunpower Philippines Manufacturing Ltd. is a producer of solar modules for commercial purposes. It operates as a subsidiary of California-based Sunpower Inc.
As for Washington’s move to slap 25-percent duty on steel and 10 percent on aluminum, Lopez said Manila can live with this, given that the country is not a major exporter of the two products.
In spite of saying the Philippines is safe from any damage, the trade chief urged China and the US to practice restraint and not escalate matters further. “Of course, we hope the trade issue doesn’t worsen and world trade goes back to globalization mode,” he said. As any believer of free trade would say, Lopez concluded, “Nobody wins in a trade war.”