Reprieve

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As we, in this part of the hemisphere, were sleeping, the other side of the trading world was greeted with a surprise proclamation that the United States’ (US) reciprocal tariff on 185 economies, including the Philippines but excluding China, will be put on hold for 90 days.

Yes Virginia, there’s a three-month relief on the imposition of the reciprocal tariff, but we still have to contend with the universal 10-percent tariff on imports from all countries.

And I fully agree with the observation that the April 2 tariff declaration, which was scheduled to take effect Wednesday, April 9, sent shock waves since it was likened to a structural reform, thus reshaping the global economic system.

It’s a dramatic reversal. Alright, US President Donald Trump blinked, as the hike in tariff sent the global economy on a rollercoaster of emotions—chaos and panic—teetering on the edge.

There are different perspectives on the issue: to some, it’s a carrot-and-stick approach, while others equated it to a military tactic of shock and awe—displaying an impressive show of power and authority to paralyze or overwhelm the enemy’s perception of the economic battlefield.

Short-lived as it may be, the opinion was Trump was in control of the global economy, a situation that history tells us could be likened to the position of Dwight David Eisenhower, the 34th US president, who was the Supreme Commander of the Allied Expeditionary Force in Europe during World War II.

This far-reaching tariff war is Trump’s Art of Deal, a take-off from Sun Tzu’s classic book—Art of War, which, in sum: “Know the enemy and know yourself; one need not fear the result of a hundred battles.”

All things considered, the enemy in this far-reaching tariff war points to China, with the levy accelerating to a high of 125 percent. And it appears to be paying off, with a good number of US trading partners having already signified their intentions to face the negotiating table.

As Certified Financial Analyst Jonathan Ravelas puts it: “President Trump isolated China. Trump’s Art of Deal is working, with various countries seeking an audience to discuss terms with the US.”

I’m still in awe of the story behind the US President’s seemingly adversarial demeanor on China, considering that the world’s second-largest economy is one of the biggest holders of US IOUs. JP Morgan reports that as of January this year, China holds approximately $760.8 billion in US Treasuries, with Japan holding more.

From what I heard along the banking corridors, frenzied trading of US Treasuries ensued as a result of the temporary tariff break, with yield going up to 4.5 percent from four percent.

Domestically, the pause could allow the country’s economic team and its regional peers to contextualize the subject to draw up and come up with a more thought-out collegial approach.

As I write this for my Friday column before the Thursday lunchtime deadline, the marketplace is all revived up, already anticipating a 25-basis point (bp) cut on the key interest rate of the Bangko Sentral ng Pilipinas (BSP).

With the peso appreciating to an opening rate of ₱57.18 from a closing rate of ₱57.43 Tuesday, some market players, however, are betting on a possible 50 bps for the BSP to be ahead of the curve.

The Trump tariff issue is an economic combat in progress, and we ain’t seen nothing yet. Asian Development Bank (ADB) Chief Economist Albert F. Park, during the bank’s presentation of its latest Asian Development Outlook (ADO), stated: “We will reassess its effects” and incorporate the developments in their forthcoming forecasts this July.

In its April 2025 ADO, the multilateral agency downgraded the growth of developing economies in Asia and the Pacific by a skimpy 0.1-percentage point to 4.9 percent for the year. Specifically, the Philippines’ domestic economy is expected to expand by six percent, anchored on robust domestic demand and modest inflation.

Despite the relief, the wheels of the tariff issue continue to churn, and affected economies should keep their seatbelts fastened because the 90-day horizon is gloomy and uncertain. We’re not yet out of the woods.

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