US tariffs effects on the Philippines

Trump’s “on and off” implementation/deadlines on the massive tariffs on almost 100 countries in the world are mind boggling and almost weird. There have been three or more changes/postponements, depending on the economic and political reactions in the US and in the targeted countries. The consequences on the Trump administration and on the Republican Party were also major considerations on the varying/wavering tariff decisions.

Last week’s 90-day delay on most of the tariffs except for China, means that the Trump administration was feeling the strong opposition by most American businessmen and citizens, due to the short-term and probable long-term effects of the tariffs on them. The simultaneous drop in prices in the US Stock and Bond market, together with the falling World’s Stock prices, made Trump backtrack and postpone the tariffs for 90 days. It is still uncertain what will happen after 90 days.

The immediate effects of the 17% tariffs on Philippine products sold to the US have and will be minimal in the short term. It even exempts some electronic components. On other products, Vietnam and Indonesia have been imposed higher tariffs of 45% and 34% respectively, so Philippine products will be more competitive in the US market. Lower-order volumes and prices may eventually affect Philippine exporters, but these will happen later and give time for exporters to seek other export markets. The counteractions of countries affected by the tariffs and the disruptions in the supply chain may lead to a world recession that may shrink the export markets. Hopefully, this will take time.

As the tariffs do not cover services, the Philippines BPO sector will also not be immediately affected, until the US companies outsourcing these services get affected by an economic recession. Filipino OFWs foreign exchange remittances to the Philippines will not be affected, unless they of their employers are covered by the wide layoffs of federal employees, or an economic recession or depression occurs in the US and European countries. Maybe, the Philippine economy can breathe easy in the next seven months until Trump makes the next irrational decision.

The long-term effects of tariff walls are more disastrous and were experienced in the 1920’s and the 1930’s. It partially provoked the First World War and lengthened the Great Depression, that worldwide economic cooperation and international trade were promoted for economic development and world peace. The concepts of free enterprise and comparative advantages lead to globalization of the supply chain that is now operating all over the world.

There are too many variables in economics and politics, it is impossible to manage and control the outcomes even by the strongest governments. That is why nobody can predict the future scenarios of the world. But at the very least, we should learn from history and the lessons of the past. I recently read an article about the current turmoil in the USA, and it was titled “I Have Seen the Future and It Is Not in America”.