Preparing ourselves for the global economy

With the tariff war launched by the United States vs Canada, China, Mexico and the European Union now in full swing, many countries including ASEAN member-nations are bracing themselves for any potential fallout from the situation that has been described as a “tit-for-tat” due to the retaliatory tariffs being imposed by the “warring” countries on a widening list of products.

According to analysts, the intensifying competition between the US and China could prove to be challenging for countries in Southeast Asia, with Thailand, Vietnam and Malaysia being particularly “vulnerable” to the impact of increased tariffs. This is why it’s become all the more important to have the Regional Comprehensive Economic Partnership – said to be the biggest regional trade agreement in the Asia-Pacific – since one of its aims is to lower (if not eliminate) tariffs on a wide range of goods and services and reduce trade barriers among member-nations that include all 10 members of the ASEAN, analysts said.

While some countries in Asia may not be directly affected, “the impact of rising tariffs and trade wars could cause major disruptions to supply chains, slow down trade and investment flows and significantly set back the growth of the global economy,” Singapore Deputy Prime Minister Gan Kim Yong said during a recent global thought leadership event.

But “in spite of the risk of greater economic fragmentation, there is good reason to remain optimistic that Asia will remain a beacon of growth, opportunities and prosperity,” Gan asserted, pointing to the Asian economy’s projected expansion to 60 percent of the world’s GDP by 2030, with Southeast Asia also projected to become the fourth largest economy in the world by that time.

Analysts are confident that the Philippines is “well-insulated” from the impact of the retaliatory tariffs due to its trade balance since the country imports more than it exports, plus the fact that 75 percent of its economy is driven domestically. Besides, our trade surplus with the US is not that big, unlike countries with significant trade surpluses such as Canada, Mexico, the European Union and China, which have all become the target of President Trump’s retaliatory tariffs.

The National Economic and Development Authority believes that the Philippines could even gain from the current trade war between the US and its trade partners if we position our country as an alternative source of exports to the United States. A lot of foreign companies are now looking at the Philippines as an alternative destination since they will not be severely hit by the tariff fallout.

It goes without saying that we need to ensure that our economy remains resilient if we are to hurdle the challenges and the uncertainties brought about by the escalating tariff tensions. A lot of businessmen I have spoken with say they are relieved that we have someone like Secretary Frederick Go, whose role as the President’s special assistant for investment and economic affairs practically puts him on top of the economy.

In fact, some of the biggest business groups in the country have expressed their strong support for Secretary Go’s efforts to push for reforms that would make the Philippines more attractive to investors, among them the landmark CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises) bill that aims to provide tax incentives and stimulate economic recovery.

According to the Board of Investments (BOI), the total approved investment commitments in 2024 hit an all-time high of P1.9 trillion, exceeding the administration’s P1.5-trillion target.

“This unprecedented performance shows growing investor confidence in the Philippines and the success of the administration’s investment and economic policies. We are optimistic that these approved projects will translate into tangible economic benefits in the coming years, including the creation of more and better job opportunities for Filipinos and paving the way for sustainable, investment-led growth,” Secretary Go remarked, adding that these approved investments could create over 130,000 jobs.

Trade Undersecretary and BOI head Perry Rodolfo has also been very active in exploring increased collaboration with non-traditional trading partners such as Paraguay, whose Vice Minister for Investments and Exports was in the country last month for an official visit. USec Rodolfo is also confident that the Philippines will have a better chance of pushing for a bilateral free trade agreement and sectoral agreements with the United States under the administration of President Trump, noting that the US president welcomed the idea of an FTA when he came here for a visit in 2017. During the Biden administration, it was “so difficult to even have a watered-down statement that would say that the US notes the Philippines’ interest in a bilateral trade agreement,” the DTI official said.

Here in Washington, our economic team is continuing to work on a potential free trade agreement and reviving the discussions that we had during the first Trump administration. We are also looking at sectoral agreements as advised by former US Commerce Secretary Wilbur Ross since these would provide better opportunities in certain industries like semiconductors and minerals, for instance.

We are also continually working on the renewal of the US Generalized System of Preferences (GSP) which was placed on the backburner due to COVID-19 and the Speakership issue in 2023. With Republicans holding the majority in Congress, we are confident the GSP will be renewed.

As I have emphasized on many occasions, we must become economically prosperous to achieve economic security that, in turn, would make us strong and resilient to withstand risks and challenges in the face of a global economy.

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