US tariff suspension on China products eases trade concerns

MANILA, Philippines — The announcement over the weekend by US President Trump that his administration would delay raising tariff on Chinese imports should ease some of the uncertainties hanging over international trade, but is not expected to boost the Chinese economy anytime soon, said UK-based think tank Oxford Economics.

The prevailing weakness in the Chinese economy and trade tension in the US have been cited as among the reasons for the weak Philippine trade data in December 2018.

Trump’s announcement on Sunday followed weeks of talks by the two countries to hammer out an agreement to end the trade war. This delays the planned imposition of additional tariffs on Chinese products beginning March 1.

“The tariff suspension and increased likelihood of a more lasting agreement should be a positive for international trade and business in both countries, as well as the global economy more generally,” said the research firm in a report yesterday.

“This is because it reduces some of the uncertainty that has been hanging over international trade and investment and seems to further confirm that, in the end, in such international conflicts the Trump administration seems to strive for deals rather than escalation,” the report added.

Oxford Economics noted, however, that while this is an encouraging sign from the US, “there is no reason to turn over-optimistic.”

“Underlying tensions on technology, China’s industrial policy and, more broadly, the rise of China, are unlikely to subside any time soon. Indeed, a desire to be tough on China runs across the US political spectrum,” the firm said.

“We don’t expect the existing tariffs to be reduced anytime soon. It is also not clear whether there will be any significant reduction in other US restrictions in the area of technology or a change in its stance on (Chinese tech firm) Huawei,” it added.

Earlier this month, the National Economic and Development Authority (NEDA) attributed the weakness in the December 2018 trade data to regional uncertainties brought about by the weakening of the Chinese economy and the US-China trade tension.

The country’s trade gap narrowed to a three-month low in December as imports declined sharply alongside exports.

Trade deficit in December 2018 stood at $3.75 billion, narrower than the gap of $3.97 billion in December 2017. This is also narrower than $3.90 billion in November 2018 and $4.081 in October 2018.

Total external trade in goods in December 2018 fell year-on-year to $13.19 billion as exports fell to $4.72 billion alongside the deceleration in imports to $8.47 billion.

The slowdown in imports for the first time in 2018 were caused by declines in the inbound shipments of raw materials and intermediate goods, as well as capital goods which are used as inputs in industrial output.

Sharp declines in outbound shipments of machinery and transport equipment, coconut oil, electronic products, and other manufactured goods were seen during the month.

“Merchandise trade in all the monitored Asian economies continued to weaken in the last month of 2018 as the region began to feel the impact of the weakening Chinese economy and the US-China trade tension,” said Socioeconomic Planning Secretary Ernesto Pernia earlier.

As policy uncertainty remains a threat to global trade, Pernia said the government should continue to work on legislative reforms that would open up sectors to foreign investment.

These include the proposed amendments to the Foreign Investment, Retail Trade and Public Services Acts.