Philippines manufacturers may benefit from US, China trade war

MANILA, Philippines — The Philippines could further stand to benefit from the ongoing trade war between two of the world’s largest economies, this time as a production site for affected manufacturers.

Trade Secretary Ramon Lopez reiterated yesterday the ongoing trade war between the US and China would not have a major impact on the Philippines and may in fact, benefit the country in some aspects.

According to Lopez, the US is using three provisions in its trade laws as bases for tariff imposition.  

“First is Section 301 of its National Trade Act that authorizes the US president to impose tariff or any retaliatory acts against foreign countries that violate trade agreements or engage in unfair trade practices, in this case against China for intellectual property rights related issues. Thus, the US will impose a tariff of 25 percent on $50 billion imports from China. The latter stated that it shall also impose retaliatory moves against the US,” he said.

“This will have a huge impact on the economies of the two countries, as their higher import costs will affect their respective consumers and imported inputs-using manufacturers. Trade volume between the two countries will decline.  This can backfire on the US as costs and competitiveness will affect their industries.  This may also lead to moves by affected manufacturers to shift their production activities to other countries like the Philippines,” Lopez said.

He said another trade move of the US is to invoke Sec. 232, imposing tariff on products to address issues on national security, wherein products covered are steel (25 percent tariff) and aluminum (10 percent).

“Philippines is a not a major exporter of steel and aluminum.  Philippines trade representatives are meeting with USTR to also file for exemption because of de minimis levels or below three percent of US imports. As we see no major impact to Philippines, we may stand to benefit if other affected manufacturers in countries affected shift their production base to the Philippines to avoid facing higher tariff rates,” Lopez said.

Lastly, Lopez said the other trade move of the US is not country-specific, but product specific, and will affect not only China, but other countries.

By invoking Sec 201 of the US Trade Act, the US can impose duties and non tariff barriers on products that injure or threaten to injure their local industries.

Affected products are solar panels and washing machines.

“For the Philippines, there is no impact for washing machines, but there is an impact for solar panels since there is one major exporter, Sunpower Inc. The company has submitted position for exemption,” Lopez said.

The Philippines, as a heavy consumer of steel and aluminum because of its Build, Build, Build infrastructure program, was earlier expected to benefit from lower prices from the imposition of steep import tariffs on the said products.

Meanwhile, Lopez said the Philippines still enjoys the General System of Preference privilege with the US, covering 3,500 product lines that enter the US market at zero percent duty. 

As for China, he said the goodwill established by President Duterte with President Xi Jinping continues to open up huge market opportunities for Philippine products to enter the Chinese market.

“Of course, we hope the trade issue does not worsen and world trade goes back to globalization mode,” Lopez said.