SO CHINA recently slapped the United States with a set of tariffs. Most of these were implemented for agricultural products, which make up the bulk of US exports to China.
These new tariffs are clearly a response to Trump’s protectionist policies, and now, some analysts and news publications are claiming that this could be the start of a new trade war.
If (and that’s a big if) there will be a trade war, you can be sure it will affect us here in the Philippines. China and the United States are the first and third largest trading partners of the Philippines, respectively. So any economic warfare between these two countries is sure to affect us. Now, whether such repercussions are good or bad for us is another matter, however. Predicting such things can be quite tricky.
Personally, I don’t think there will be a trade war between the Philippines and China. There are a few reasons for this.
First of all, there are alternatives to China. China may be a manufacturing powerhouse and a major outsourcing destination, but they aren’t the only ones. Southeast Asia and India are possible alternatives to the PRC with regards to outsourcing. So if China doesn’t play ball then it’s possible for outsourcing companies to turn to other countries, especially those which are cheaper than China.
A second reason is that automation is coming. A lot of jobs in the United States have been lost to automation, and more are likely to disappear in the near future. This means a lot of economic activity will be automated in the future, making low labor costs in the PRC not only obsolete but also more expensive than machines. Chinese or American tariffs will not change that (unless China somehow makes their manufacturing/production costs cheaper than it already is, which is unlikely), and I believe that China knows this, and if this were the case then they will not fight to hold on to industries that will be taken away by automation.
And third, the United States has the capacity to become self-sufficient. They are already self-sufficient with regards to energy, and they have the capacity to become even more self-sufficient in the future. Chinese tariffs will disrupt trade between the US and the PRC, but perhaps such a disruption may be in US’ interest, as that will drive America back to a more isolationist position at least in regards to economics. Is China prepared to have the US walk away from the negotiation table? We’ll see.
China’s new tariffs are nothing serious. It’s more an act of saving face than an effort to effect change in the US-China trade relationship. Trade will continue, but the political and economic context under which it takes place will be different from what it once was.
The big question now is what happens next. Aside from China’s retaliation, South Korea recently opened up its auto market to US companies, and other Asian exporters may follow suit.
The Trump administration is shaking up the economic world order, and it will be interesting to see what comes next. (jdr456@gmail.com/PN)
