Global stock markets are gyrating again as traders monitor the latest developments in the US-China trade war. A full-blown trade war between the world's two biggest economies will hurt global commerce and ultimately lead to an economic slowdown.
Tensions between the US and China heightened after US President Donald Trump banned telecoms giant Huawei from the American market and restrained American companies from selling to the company. Trump's actions had an immediate effect. They prompted a number of companies around the world to reduce their business with Huawei, including Google, BT in Britain Japan's Panasonic.
Trump accelerated the war after earlier accusing China of reneging on its commitments in trade talks and ordering new punitive duties on $200 billion worth of Chinese imports by raising them to 25 percent from 10 percent. Trump later ordered a tariff increase on almost all remaining imports from China worth about $300 billion.
Global financial markets are naturally edgy over the tit for tat between the two big economies. No one will emerge victorious in a trade war, while the rest of the world, including the Philippines, are certain to suffer by way of reduced exports from the ensuing global economic slowdown.
Fitch Solutions Macro Research, a unit of Fitch Group, just downgraded its 2019 growth forecast for the Philippines to 5.9 percent from its previous estimate of 6.1 percent, taking into account the increasing US-China trade tensions. It said the escalation in trade tensions between the US and China in May would deepen the external drag on the Philippine economy.
The US and China accounted for 15.6 percent and 12.9 percent, respectively, of exported goods from the Philippines in 2018, with Hong Kong and Japan serving as key markets, buying 14.2 percent and 14.0 percent of the country's products, respectively.
Fitch further noted that the rising trade tensions between the US and China are already creating a ripple effect across Asia, weakening demand across the supply chain and dampening business confidence in the first half of 2019.
The Philippines can only hope for an an early settlement of the trade conflict between the US and China. In the meantime, it should develop non-traditional export markets to shield the economy from the costly US-China trade war.