PRODUCT diversification remains to be an effective strategy for exporters to cope with the ongoing trade war between the US and China, an official from the Philippine Exporters Confederation Inc. (Philexport) Cebu said.
“The US and China (Hong Kong) are our traditional trading partners, hence, we are also exposed to the negative impact of the trade tensions between these two countries as the uncertainties of a resolution escalate,” Phiexport Cebu executive director Fred Escalona told SunStar Cebu.
From January to April 2019, the Philippines’ total exports stood at US$21.9 billion, a drop of 2.1 percent compared from the same period in 2018. The Philippines’ export destinations during the period were the US, which accounted for 16 percent, China (12 percent) and Hong Kong (12 percent).
Escalona said investors’ confidence was shakened because of the trade tensions.
“The best way to address our export problem is to diversify, both products and markets alike,” he said.
Escalona said the Philippines can benefit from the trade spat as the US imports agriculture products, electronics and food from other countries, excluding China.
Moreover, the country can also attract foreign direct investments from China as its government is keen on helping the Philippines implement its massive infrastructure program.
The trade war between the US and China has been weakening the global markets particularly those economies whose business activities are overly exposed to these two economic powerhouses.
Singapore’s slowdown
A recent Bloomberg report quoted Maybank Kim Eng Research that Singapore’s economy will probably experience a “shallow technical recession” in the third quarter (of 2019) as the global trade outlook worsens.
“The escalating US-China trade conflict is weighing on Singapore’s export-reliant economy, which Maybank expects will grow 1.3 percent this year, down from a previous projection of 1.6 percent and lower than the government’s forecast range of 1.5 percent to 2.5 percent,” the report said.
The contraction in Singapore’s economy sent a warning to global trade as the tension between the two superpowers has stretched for two months and economies in Asia are already experiencing the effects.
“Singapore, in terms of its exports over gross domestic product (GDP) to China, is around 5.7 percent, thus the contraction in their economy could be significant. Our exports to China are smaller at around 3.2 percent of GDP,” said Escalona.
He said Singapore’s weakening economy will not significantly affect the Philippines as the country is not trading much with Singapore unlike with the US, China and Hong Kong.
China’s economic growth sank to its lowest level in at least 26 years in the quarter ending in June, adding to pressure on Chinese leaders as they fight a tariff war with Washington.
The world’s second-largest economy grew 6.2 percent over a year ago, down from the previous quarter’s 6.4 percent, government data showed Monday, July 15, 2019.
Complicated
Forecasters expected China’s economy to rebound in late 2018 but pushed back that target after US President Donald Trump hiked tariffs on Chinese imports to pressure Beijing over its technology development tactics. Now, economists say the slowdown might extend into next year.
Trump and Chinese President Xi Jinping agreed last month to resume negotiations on the fight that has battered exporters on both sides. But economists warn their truce is fragile because they still face the same array of disputes that caused talks to break down in May.
“The trade war is having a huge impact on the Chinese economy,” Edward Moya of Oanda said in a report. “As trade negotiations struggle for meaningful progress, we are probably not near the bottom for China’s economy.”
In the second half of the year, “the external environment may still be more complicated,” said a government spokesman, Mao Shengyong, at a news conference. JOB with AP
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