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Opinion

Beyond tariffs: The new era of managed trade

POINT OF VIEW - Robert Dan Roces - The Philippine Star
This content was originally published by The Philippine Star following its editorial guidelines. Philstar.com hosts its content but has no editorial control over it.

When America changes its mind, the world shifts in its seat.

Or so it seemed when US President Donald Trump backtracked on an earlier order imposing heavy tariffs on Mexico and Canada. He gave exemptions to goods covered by a trade pact he signed with the two countries during his first term.

That should somehow ease tensions among the neighbors. But not with the other big fish across the pond: China. Trade tensions there continue, maintaining significant disruption in global supply chains.

What does this mean for us? It means that because the US will have to look elsewhere for goods it regularly imports from China, we can step in and offer our own wares. We may benefit from what economists call “inflation arbitrage,” or looking elsewhere to buy something cheaper. US companies will seek lower-cost production bases outside both China and North America to mitigate inflationary pressures.

But a broader, more fundamental economic shift may also be afoot: we may be seeing a move from international trade reacting to market fluctuations to one that will also have to seriously consider geopolitics. It’s a fundamental restructuring of global commerce with several implications.

Instead of broad multilateral trade frameworks involving many countries, there seems to be a shift toward country-specific trade terms. This, in turn, appears to be encouraging regionalization over globalization – regional trade blocs are strengthening as global integration faces headwinds.

Trade terms are increasingly tied to political considerations beyond economic factors. Countries are now beginning to see their businesses not as commercial arrangements but as national security assets.

Rather than temporary disruptions, we are witnessing a fundamental realignment of global economic relationships that will persist regardless of future political developments.

The Philippines occupies a unique strategic position in this evolving landscape. Because we have strong economic ties to both China and the US, we can serve as a bridge economy connecting increasingly separated trade spheres.

We have the opportunity to establish dominance in specialty categories like coconut products, tropical fruits and sustainable seafood where it has natural advantages and growing export momentum.

Beyond physical goods, our strong business process outsourcing sector is poised to benefit as companies seek alternatives to concentrated technology providers. The Philippines offers advantages in terms of skilled workforce, strategic location and English language proficiency that could attract new manufacturing investment.

The keyword here is resilience. Our businesses must be able to stand up to pressure.

How do we build resilience? By diversifying supply chains, ensuring that they are robust and can quickly adapt to change; through cost management by streamlining operations and improving efficiency; building financial reserves to buffer shocks during downturns and fostering innovation by investing in relevant technology and innovation to stay competitive and drive long-term growth.

Many companies, including SM, recognize uncertainties in the global economic landscape. But there are opportunities around the country that continue to fuel the SM group’s optimism, albeit guarded. Even with the ongoing volatility in the markets, SM announced the largest buyback in Philippine corporate history worth $1 billion. This is a vote of confidence in the country’s growth potential.

All these indicate that challenges are opportunities, and that we should continue to push forward amid headwinds.

*      *      *

Robert Dan Roces is the economist at SM Investments Corporation, reporting to the Board chairman.

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