JC Punongbayan - US President Donald Trump’s sweeping tariffs continue to shake the global economy. Major stock markets have tanked, global uncertainty has spiked to levels not seen since the start of the COVID-19 pandemic, and China already retaliated with its own tariffs against US imports.

In the Philippines, though, President Ferdinand Marcos Jr. has yet to come up with a solid and coherent stance in response to the Trumpian trade offensive.

Members of his Cabinet have spoken out individually, but many of them sound unreasonably optimistic (if not naive) about what’s happening. The New York Times took notice: it said in a recent piece that, “The Philippines may be the only government in the world that has called Mr. Trump’s tariffs ‘good news.’”

For starters, Agriculture Secretary Francisco Tiu Laurel Jr. looked at the 17% tariff imposed on the Philippines, and noted that it’s “one of the lowest rates among our neighbors.” Hence, he said, “It just means that we should push for more sales into the US from our products.” Trade Secretary Cristina Aldeguer-Roque said something similar.

Special Assistant to the President for Investment and Economic Affairs Frederick Go says the best outcome for the Philippines is a free trade agreement with the US, which the US Trade Representative has agreed to discuss

Philippines and Singapore get relatively lower tariffs compared to other Asian nations, following US President Donald Trump’s sweeping imposition of 10% baseline tariff on all countries

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’The fact remains that our products will still become 17% more expensive to the American consumer who can then decide to stop buying our products and shift to cheaper substitutes,’ former agriculture chief Leonardo Montemayor says

Meanwhile, Finance Secretary Ralph Recto acknowledged that the Philippines will feel the indirect effects as the global economy slumps. But, according to him, “The CREATE MORE Act,” which among other things, cut taxes on corporations, “will strengthen our ability to attract investors looking to expand or relocate to the Philippines, given the relatively lower tariffs imposed on our exports to the United States. We are also actively pursuing more free trade agreements with our global partners.”

Frederick Go, the special assistant to the President for investment and economic affairs, said that, according to the National Economic and Development Authority, total production will go down by only 0.1% in the next two years — a “minor effect,” he said. Go previously opined that “I think this opens up a lot of opportunities for companies that are based in the countries with higher tariffs to look seriously at investing in the Philippines to set up manufacturing facilities in the Philippines to take advantage of our relatively much lower tariff.”

As far as I can tell, only Socioeconomic Planning Secretary Arsenio Balisacan, a legitimate economist, offered a sensible and sober statement. In his weekly column, while he agreed there could be a silver lining, he said this would only come to fruition if “production capacity [can] meet increased demand.”

He’s right: we can’t produce at scale many of the goods that, say, Vietnam exports to the US, like electric vehicles and smartphones. The capacity to produce these things won’t be done overnight — especially with the notoriously high costs of doing business in the Philippines. So trade won’t necessarily be diverted to us amid Trump’s tariffs.

Balisacan added that, “The broader impact on the Philippine economy remains uncertain, as global tariff shifts will affect demand for its exports across all trading partners.”

Uncertainty is the keyword here, and the root of uncertainty is Donald Trump himself, who can’t even credibly commit to his own tariff offensive. For instance, he recently suspended such tariffs, applying instead a 10% across-the-board tariff on everyone except China. This occurred shortly after the US stock market plummeted to levels not seen since previous crises like the COVID-19 pandemic and the Great Recession of 2008 to 2009.

After the tariff suspension’s announcement, the market boomed again, and this has led to suspicions that Trump may have previously given a heads-up to friends and allies, and such insider information was used to boost allies’ stocks. If this is true, then worse than being bereft of economic logic and heightening global uncertainty, Trump’s tariffs might be used for his and his friends’ financial enrichment.

For all of the above reasons, I can’t understand why the Marcos Cabinet is being so blindly optimistic about the Trumpian tariffs. If it isn’t obvious yet, we’re all in a global economic emergency, because the world economic order is being disrupted by a crazy man and his mistaken (and frankly) dumb notions about the economy. Trump is proof that economic illiteracy can kill.

Rather than engage in economic cheerleading and peddle misplaced optimism, Marcos’ officials will do much better to ask and seriously address: Which sectors are most exposed? How can we support affected firms and workers? What buffers can we build now, before things get worse?

The economic managers need to be more honest about our prospects moving forward. They must also spearhead reforms that are a necessary condition for the Philippines especially at this time. How can we diversify our exports if we can’t build capacity to begin with, because we’re not seen as an attractive investment destination? How can we significantly reduce the costs of doing business in the Philippines, including tedious regulations, lack of infrastructure, and high costs of power and other crucial inputs?

To respond to Trump’s tariffs and seize the moment, therefore, the Philippine government needs to put in place honest-to-goodness reforms. Economic cheerleading on the part of Cabinet members can only bring us so much. – Rappler.com

JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan) and Usapang Econ Podcast.