Brace yourselves! US tariff increases will hit economy hard

PRESIDENT Ferdinand Marcos Jr.’s servility to US wishes — to the point of agreeing to the installation of American missiles here which has made us a prime target for a devastating Chinese attack — is proving to be totally useless to us.

Marcos’ unthinking spokesman Clarissa Carlos-Seechung claimed that US President Trump’s “reciprocal tariffs” imposed on us is the second lowest such tariffs imposed, 17 percent, just above the 10 percent imposed on other countries.

Go even claimed astoundingly: “To me, it’s good news … as firms with higher tariff rates will be moving here.” Huh?

What Carlos-Seechung and Go don’t know, and lazily didn’t bother to check, is that out of the 187 countries that Trump had imposed reciprocal or new tariffs, 127, or 69 percent, had only a 10-percent reciprocal tariff.

Yep, the US imposed just 10-percent tariffs on countries like Brazil, Singapore, its virtual enemy Iran and 124 other countries, but 17 percent on us, its loyal pawn in Southeast Asia against China.

Most analysts estimate that US companies in countries whose products are slapped with higher rates will be moving back to America or to other countries with just 10-percent tariffs, not to the Philippines, which hasn’t been an ideal site for them, even with the pre-Trump tariffs. Such things as government corruption, terrible infrastructure and rising criminality — things which Go’s boss has done nothing much to address — make us unattractive, rather than US tariffs.

Disservice

Go and Carlos-Seechung are doing their boss and the country a colossal disservice by pooh-poohing the impact of Trump’s global tariff increases. Marcos might believe them and, instead of creating a task force to deal with the impending crisis, will be, as he has been doing, spending his time cutting ribbons and partying the whole night. By contrast, months before the global financial crisis broke out in 2008, then-president Gloria Macapagal Arroyo created a task force that created her Economic Resilience Program supported by a P330-billion fund that Congress allocated through a special law.

Or maybe let’s thank this duo for being clueless about the impact of Trump tariffs: Because of its global impact, the country faces an economic downturn the kind that broke out from 1984 to 1985 (due partly to the global debt crisis) that resulted in widespread discontent. That encouraged the RAM coup, which eventually led to the EDSA 1 uprising.

I was astounded that our ambassador to the US, Jose Romualdez, in his column in the Philippine Star, seemed oblivious to the US move that will hurt the country. He should move his ass pronto and scramble to mobilize all the goodwill for the Philippines that he boasts he has generated, and lobby Trump to put us among the127 countries that imposed the lower 10-percent tariff, or better yet, grant exemptions on certain products such as coconut oil. In his column, he praises the plan for taxpayers to pay $5.7 billion for Lockheed Martin jet fighters we will never use in actual combat (with China which has 3,000 jet fighters?) — when Trump’s 17-percent additional tariff will reduce billions worth of US imports of our products.

The US is our second-biggest export market, shipping to it $12 billion in 2023. Average tariff to the US has been low, averaging 1.47 percent because of the US Generalized System of Preferences and the Information Technology Agreement.

Effective April 9, the Trump offensive raises the average tariff to 17 percent, for an increase of 15.5 percentage points. This is the very first time ever that any country has drastically raised its tariffs on any of our exports.

While integrated circuits are exempted from the increase, electronics, the Philippines’ top export to the US, previously faced near-zero tariffs under the ITA. A 17-percent tariff could add $1.7 billion annually to the cost of $10 billion in electronics exports. This makes Philippine products less competitive, as US buyers may turn to cost-effective alternatives like Vietnam or Malaysia.

Agricultural

Agricultural exports, such as processed foods, face a higher impact due to preexisting US tariffs and non-tariff barriers. A 17-percent tariff on $1.4 billion in agricultural exports (10 percent of $14.2 billion total exports in 2024) adds $238 million in costs, potentially reducing demand for Philippine goods like coconut products and tuna. The powerful US soybean industry could drastically replace the coconut oil imports from the Philippines permanently.

Garments, facing a 17-percent tariff, could see price increases of 15-20 percent, as seen in historical US tariff impacts (e.g., Trump’s 2018 washing machine tariffs raised prices by 12 percent). This could cost the sector $120–$240 million annually on $1.4 billion in exports.

Trump’s tariff increases will cost the Philippines at the very least $1-$2 billion in foregone exports. They threaten the Philippines’ export-driven economy, which has the US as its second-biggest market, after China. The damage could even be permanent, as consumers may buy products from other countries on a continuing basis.

The tariff increases could also slow down US business process outsourcing that has become a big business activity in the Philippines, with US firms being its biggest client.

Slowdown

Other than its direct impact on Philippine exports, the country will be hit by the global slowdown in the world economy, which most economists forecast will be the impact of the Trump tariffs, at least for a year, until businesses worldwide adapt to the new prices. This means reduced export orders by other countries, such as China, Europe and India.

Trump’s tariffs are unprecedented in modern times, with the US average tariff rate jumping from 2.5 percent in 2024 to 22 percent in 2025, a level not seen since 1910, according to a Fitch Ratings analysis. The US imported $3.3 trillion in goods in 2024, and an average tariff of 29 percent — the high estimate of the tariff level — could add $1 trillion annually in costs, or $7,300 per US household, potentially leading to import shortages and price hikes. This could remove the US as a key driver of the global economy, especially for export-dependent nations like China and Germany.

A global trade war among the biggest economies never before seen has broken out. This is reminiscent of the US Smoot-Hawley Tariff Act of 1930, which deepened the Great Depression by collapsing global trade by 66 percent. China has imposed a 34-percent tariff on US goods, the Europe a 20-percent levy and Canada has enacted $20.7 billion in retaliatory tariffs. JP Morgan raised its global recession odds to 60 percent by year-end 2025, up from 40 percent, citing the tariffs’ impact on growth and inflation. Oxford Economics predicts global growth could fall below 2 percent, the weakest since the 2008 financial crisis predicted a recession.

Global stocks lost $5 trillion in value since the announcement, with the Standard & Poor 500 falling 9.1 percent over five days, its worst stretch since March 2020. The Dow index fell nearly 4 percent, while Japan’s Nikkei saw its biggest weekly drop in five years, reflecting fears of a global downturn.

Yet Marcos economic adviser Go says Trump’s tariff initiatives are “good news.” What is he smoking?

Production

Half of US imports are production inputs, and tariffs increase manufacturing costs, potentially reducing US gross domestic product growth in 2025, with exports projected to fall 18.1 percent.

Economic forecasts, of course, are not prophecies, nor is there a consensus on the tariff increases’ impact. The International Monetary Fund’s Kristalina Georgieva for instance claimed that a global recession is not imminent, though she expects a downward correction to the IMF’s 3.3-percent global growth forecast for 2025.

Ironically, what could stave off a recession would be if Trump eases off or even abandons his tariff project. In fact, he has already sent mixed signals, suggesting the tariffs may be a negotiation tactic rather than permanent policy. As he told reporters, “The tariffs give us great power to negotiate.” Some investors believe the tariffs may not be fully implemented, which could mitigate their impact. Trump might also be vulnerable to lobbying by big business and grant exemptions for certain products, as he did for integrated circuits.

The additional even bigger risk for us, of course, is that Marcos has proven to be an incompetent president, that the Philippine ship of state might not even have a captain to weather this global and domestic storm.

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Brace yourselves! US tariff increases will hit economy hard
Source: Breaking News PH