Reordering

Donald Trump’s pronouncements may swing back and forth like a disoriented pendulum. But at this point, after all the ridiculous things he has done, he may not matter anymore.

Since April 2, when he made that startling announcement about imposing “reciprocal” tariffs on all economies, including uninhabited islands, the global economy has been reordering itself. There is as much physics here as economics. Like a great river, the flow of international trade skirts obstructions and meanders along the path of least resistance.

The EU, according to the latest reports, is now ready to bring down trade barriers with China – including tariffs earlier imposed on Chinese electric vehicles. We can expect more intensive trading and investment flows between the two in the coming period.

Chinese president Xi Jinping did not miss a beat. Last week, he embarked on a high-visibility tour of three ASEAN countries: Vietnam, Malaysia and Cambodia. Ironically, Beijing has rightly positioned itself as the guarantor of free trade. Xi offered China’s neighbors more trade and investments to weather the coming economic storm.

Indonesia president Prabowo immediately flew to Kuala Lumpur for discussions with Malaysian prime minister Anwar Ibrahim. Along with Singapore, the three countries are devising a joint strategy to enable their economies to cope with the fallout of Trump’s assault on the global trading system.

Singapore’s prime minister SG Wong was uncharacteristically outspoken. He described Trump’s tariffs as “not actions by a friend.”

Although his wealthy city state was slapped only 10 percent tariffs by the US, the Singaporean leader strongly warned: “We are entering a new phase in global affairs – one that is more arbitrary, protectionist and dangerous.”

The emerging consensus among the ASEAN leaders, in conference with China, is to rapidly deepen regional cooperation and further accelerate the commitments made under the China-ASEAN Free Trade Area 3.0. The rapidly emerging economies of East Asia are among the most severely affected by Trump’s unilateral actions. The region’s economies will be better off acting as a solid bloc.

While the leaders of our neighboring countries are acting with urgency to meet the contingencies of a shaken global trading order, the Philippine reaction was oddly nonchalant.

When Trump’s “Liberation Day” tariffs were announced, our officials quickly declared that the lower tariff rate (17 percent) imposed on our country will give us distinct advantages over our neighbors. This odd assessment was made at about the time it was reported that Vietnam was now selling more bananas to China than we do. That is the equivalent of BYD overtaking Tesla in EV sales.

Given the geopolitical context, our banana industry is in serious peril. But our leaders seem unperturbed. No high-level consultations have been called and no pro-active policies have been announced.

When the sky is falling, the differentials between tariffs imposed on us and those imposed on our neighbors matter very little. Inasmuch as the punitive tariff rates have been suspended for 90 days, they do not matter at all at this point. But what will matter is that our friends in the ASEAN will remember that when the crunch came, we chose to gloat over their worse fate.

More and more, as the global trade reordering happens, the Philippines will stick out for its inaction and lethargy in the midst of crisis. We cannot live down the moronic insular assessments made by our economic policymakers. We were behaving like the ASEAN free trade area did not exist. This is embarrassing.

The economic destruction wrought by Trump’s tariffs will hit us in many ways. About 41 percent of our remittance earnings come from Filipinos in the US. Should the US fall into a recession, remittance flows are bound to dwindle. So will the revenues we make from the business process outsourcing that employs younger Filipinos.

The Philippines may be an archipelago. But our national economy is not an island. Isolationism will drown us ahead of everybody else.

Already, the IMF has downgraded global economic growth for this year as a result of the destruction wrought by Trump’s tariffs. Major banks have likewise downgraded our growth prospects. We will be lucky to make five percent this year. Kiss the six to seven percent growth target set by our technocrats goodbye.

If we are unlucky or simply unresponsive, we could be pulled down by the whirlpool of global recession.

Several business groups, including the Philippine Chamber of Commerce and Industry, have called on the Marcos government to swiftly set forth strategic policies to support Filipino businesses and consumers in the face of an escalating trade war. But while they knock on many doors, no one seems to be home. Our policymakers all seem to be out electioneering: fiddling while the economy burns.

In a statement, the PCCI warned: “The ripple effect of absorbing extra costs will be hardest on small businesses, particularly those in agriculture and food processing.” The Chinese Ambassador to Manila, Huang Xilian, echoes the warning of our business groups. During times of challenges, he said, countries should aim for more cooperation instead of pursuing isolationist policies.

The Philippines, in this crisis, is awkwardly positioned. Since our politicians have made a cottage industry out of Sinophobia and our foreign policy aligned so closely with the US, we might not be ready for the coming consolidation of the regional economy to thrive in the reordering. We will be the ASEAN’s missing sibling.