THE trade conflict between the United States and China may be benefiting the Philippines in the short run, but the country, as with fellow Southeast Asian countries, is bound to take a stronger hit from an overall slowdown in export demand if the tariff war is protracted.

That’s why the Philippines has to take stronger action in pushing for the end of the trade conflict, according to Michael W. Michalak, senior vice president and regional managing director of the US-Asean Business Council. “It is kind of hard to separate Asean from the rest of the trade figures because most of the trade figures are all put together,” he said.

“We have obviously seen an impact on trade as exports are down, and exports are down all over the world. I guess the most important thing about the conflict is that nobody wins a trade war. President Trump has said over and over again, trade wars are easy to win, [but] I don’t know on what he bases that,” Michalak said.

Based on government data, Philippine exports grew flat at 0.85 percent to $69.3 billion last year, from $68.71 billion in 2017. Shipments of electronic products, the country’s top exports, rose 4.9 percent to $38.32 billion, from $36.53 billion—although figures improved, it was lower than the semiconductor industry’s 2018 forecast of 6-percent growth.

“Even if Vietnam, the Philippines, Thailand, Indonesia…do see an increase in foreign direct investments, an increase in piece in a smaller global pie is not sustainable. That’s why nobody wins a trade war,” Michalak argued.

Michalak, a former US diplomat to Vietnam, may be right about this. Shipments of electronic items to China expanded 23.68 percent to $4.7 billion in 2017, from $3.8 billion in 2016, but only increased 6.17 percent to $4.99 billion last year.

The US and China have been engaged in a trade conflict for over one year now, tracing back to when US President Donald J. Trump slapped duties on washing machines and solar panels and, subsequently, increased tariffs on steel and aluminum. The past year saw the US imposing 25-percent tariffs on $250 billion worth of Chinese imports.

The tariff race between the world’s largest economies is slowing down global economy. In August the World Trade Organization projected growth of world merchandise trade will likely remain weak in the third quarter and in the months after.

The trade conflict between the world’s largest economies has recently taken Manila’s proposed free- trade agreement with Washington as a casualty. The Office of the US Trade Representative has put on hold all efforts to negotiate a trade deal with the Philippines as it settles the China situation first.

Whatever Southeast Asian economies stand to gain in the tariff war resulting from capital flight from China, this will be offset by overall slower demand for their exports, Michalak projected. As such, he advised state officials to reevaluate their statements before claiming their country will benefit from the trade conflict.

Source: Business Mirror

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