PH to assess impact of US-China trade row
The economic team is closely watching and bracing for the impact on the domestic economy of another round of higher tariffs slapped by the United States on Chinese products, a development seen to further weaken global trade while also presenting opportunities for investors to move to the Philippines.
Despite ongoing trade talks between Washington and Beijing last week, US President Donald Trump announced a fresh 10-percent tariff to be levied on $300 billion worth of Chinese imports.
“This action will tend to increase the economic headwinds we are already facing. This development will be the subject of our next Economic Development Cluster meeting,” Finance Secretary Carlos G. Dominguez III, who heads the Duterte administration’s economic team, said on Friday.
Dominguez, who also represents the administration in the Monetary Board, added that the latest moves of the United States would be part of the analysis when the Bangko Sentral ng Pilipinas’ (BSP) policymaking body meets on Thursday (Aug. 8) to decide on its monetary policy stance.
For Socioeconomic Planning Secretary and National Economic and Development Authority (Neda) chief Ernesto M. Pernia, the latest US move “can only worsen economic situations in the two countries, the world as a whole, and in emerging economies like ours.”
To ease the downside risks, Pernia told the Inquirer that the Philippines needed to implement policy measures to draw in trade diversion effects and entice firms relocating from China.
Last week, UK-based Oxford Economics said the Philippines stood to gain when investors in China relocate to neighboring countries amid rising production costs in the mainland and its trade war with the United States.
“The outcome of the trade dispute is far from clear, but we think that Asia excluding China will benefit, with growing consumption in the region helping to anchor relocation locally,” Oxford Economics senior economist Tommy Wu and economist Thatchinamoorthy Krshnan said in a July 30 report titled “The evolving story of Asia’s supply chains.”
“India and emerging Southeast Asian economies that have abundant unskilled labor pools will likely attract production of less complex products and the less sophisticated parts of highly complex products,” Oxford Economics said.
In the case of the Philippines, Malaysia and Thailand, Oxford Economics said these three countries were well-placed for manufacturing of medium-complexity products, specifically electrical machinery and office machines.
As for complex products, the Philippines and other Asian countries can also host production of less capital-intensive inputs in the supply chain, it said.
“These production processes could be moved to relatively less capital-abundant countries such as Malaysia and Thailand, while the least capital-intensive processes could be moved to Indonesia, Philippines, India and Vietnam,” according to Oxford Economics.
Also, Oxford Economics said the entire Asia except China stood to benefit from supply chain relocation as the region remains attractive among export-oriented foreign investors. —BEN O. DE VERA
