4 weeks ago
9
The brewing tariff war between the world’s biggest economies is expected to hurt Philippine exports to the United States (US), China, and Southeast Asia, according to a new academic research.
The study titled “Navigating turbulent waters: The Philippines’ global value chains experience amid trade wars,” authored by Adrian Mendoza of the University of the Philippines School of Economics (UPSE), noted that the government must exert effort to capture some gains as a new wave of tariff disputes begins.
Following US President Donald Trump’s return to the White House in January 2025, he is upping the ante with new tariffs framed as a tool to grow the American economy.
The US recently imposed an additional ten percent tariff on Chinese goods, which China retaliated by ordering tariffs on a number of American products including coal and oil.
This tit-for-tat dispute started all the way back to Trump’s first term, and currently, still without an end in sight.
With this, the UPSE study recalled that the first scrimmage between the two global giants in 2018 and 2019 could be a mere reflection of what might happen in 2025.
It argued that tariff wars can generate “negative spillovers” that may hurt not only the parties directly involved but also peripheral economies that maintain strong linkages with the disputing countries.
“The end results can be catastrophic: supply chain disruptions, higher input and consumer prices, and costly adjustments in investments and productivity,” the study read.
Based on estimates from the Asian Development Bank Multiregional Input-Output Table (ADB-MRIOT), the Philippines has one of Southeast Asia’s strongest global value chain (GVC) linkages.
The country's GVC transactions are primarily focused on manufacturing activities in electronics, food, beverages and tobacco, machinery, and metal products.
According to the study, the growing disregard of the rules-based trading system in favor of power-based tariff negotiations is particularly devastating for smaller economies with weak bargaining power.
However, it argued that this is not a mere lost cause for the Philippines as the country may find itself replacing Chinese goods coming to the US.
This potential depends on how strong the country’s domestic manufacturing can be, which requires more investments to build stronger technological capabilities.
To achieve this, the UPSE study emphasized the need for a more robust government support, with policies that prioritize domestic and foreign investments aligned with strengthening the country’s GVC connections.
“An added challenge for the Philippines is that it is trying to catch up within a very dynamic environment. It is important that domestic strategies be anchored on the regional context that is itself evolving very fast,” it said.
The Association of Southeast Asian Nations (ASEAN), in particular, is urged to refrain from imposing additional tariff and non-tariff distortions that could exacerbate the impacts of the US-China tensions.
The region, according to the study, should instead demonstrate that the “unhampered functioning of global production networks greatly depends on trade facilitation and policy coordination”.
It added that the ASEAN should act collectively in advocating for reforms in the rules-based trading system that can adapt to the evolving global landscape.
