[In This Economy] Trump’s tariffs and Marcos’ radio silence

In the past two weeks, I got to travel around Europe, just as US President Donald Trump unleashed his crazy tariff offensive against almost every country in the world.

My friends and I visited Finca Loranque, an estate in rustic Toledo, Spain, which produces exquisite merlot, tempranillo, and cabernet sauvignon (among other wine varieties) for export to many countries around the world.

Angela was our smart tour guide, and apart from teaching us the intricacies of wine-making and wine-tasting, she voluntarily shared that they themselves have been affected by Trump’s tariffs.

I interviewed Angela and she told me, “We export our products mostly to the United States, in two states: New York and New Jersey…We also have some clients in China and in Taiwan. And the rest of our products are going to some countries in Europe: Italy, Netherlands, Germany, Portugal.”

Because of Trump’s tariffs, Angela said, their industry is in wait-and-see mode: “Now we will see how everything is evolving, because at the beginning [Trump] said 200% tax, and that’s too much. Later he said 20%, but just today he said we will have a universal tax that is 10% for 90 days, so we will see if some will cancel orders. Some of our clients in the United States told us, ‘Okay we need to wait, we need to see how everything is going’…”

Indeed, there are reports of US importers already halting their orders from Europe.

“We need to sell, of course,” Angela noted with a hint of worry, “and if we see that the situation is not moving forward, then we should find other places to sell.”

The newfound troubles of this small wine-making estate in Toledo is just a micro peek into the global economic catastrophe that Trump created. Almost no country will be spared.

The European Union has been forced to retaliate and is now imposing record-high tariffs against US imports. Meanwhile, China, the world’s largest economy by one measure and a major target of Trump, also hit back with a 125% tariff against the US.

That’s the trouble with a trade war: it forces countries to hit back against one another in an endless spiral. In Filipino, this is the equivalent of an international pataasan ng ihi (pissing contest).

Even if only a few economies have retaliated against Trump’s tariffs yet, all this kerfuffle has already cast gloom over the world economy’s prospects.

In a new analysis, the International Monetary Fund reported that global growth is expected to slow down this year. From a predicted 3.3%, they now see the global economy growing just 2.8% — and that’s a huge drop. It means global progress will be stalled. They explained, “Sentiment was optimistic at the beginning of the year but has recently shifted to a notably more pessimistic stance as uncertainty has taken hold and new tariffs have been announced.”

The world’s richest economies are set to be hurt, but especially the US, which is now expected to grow at just 1.8% and not 2.7%. In a way, Trump has hurt his own economy, but he stubbornly refuses to see that. Let’s see how much his popularity ratings can withstand his economic illiteracy.

The Philippines isn’t spared, either. Originally the IMF expected 6.1% growth for this year, but now the forecast is down to a disappointing 5.5%. Worse, the projection for 2026 also dropped from 6.3% to 5.8%. This tells us that the effects of the global trade war will last into the future, if nothing else happens.

We need to look out for our neighbors, too. In a new paper for the Philippine Institute for Development Studies (PIDS), former trade undersecretary Rafaelita Aldaba analyzes how the Philippines and four other ASEAN countries — Indonesia, Malaysia, Thailand, and Vietnam — are positioned amid the US-China tariff shifts and global value chain realignments.

Using a Tariff Exposure Composite Index, Aldaba’s study finds that the Philippines and Malaysia face moderate-to-low risk due to low tariffs and broad exemptions, especially in electronics. Indonesia is moderately at risk, while Vietnam and Thailand are highly vulnerable due to higher tariffs and US export dependence.

Aldaba notes that we have a silver lining, similar to what I’d written in early April. But she says that the “advantage is tempered by the country’s modest export base, which significantly constrains its ability to seize emerging trade-diversion opportunities.”

In short, we could be producing goods that Americans might want to buy from us, but we just don’t have the capacity. It will take significant investments and reforms for us to develop an exports sector that’s robust and flexible enough.

Since Trump’s tariffs won’t go away any time soon, we need to respond to this new global trade order. Aldaba recommends a two-pronged approach.

First, we need to build industry’s resilience by prioritizing the transition from basic assembly to higher-value activities like semiconductor design, AI hardware, and green technologies. The country should also modernize economic zones, align education with industry needs, digitize logistics, and provide targeted fiscal incentives to attract investment in strategic sectors.

Second, she emphasizes the need for “trade defense and monitoring” to protect local industries. This includes using safeguards against unfair trade, setting up early warnings for tariff changes, helping exporters comply with rules, and creating a council to align trade, industry, and investment policies.

It’s good that more and more economists are coming up with sensible and actionable plans amid Trump’s tariffs. But till now, more than three weeks since “Liberation Day,” we haven’t heard any definitive trade strategy yet from President Ferdinand Marcos Jr. himself.

We need to hear it from himself, not just diverse opinions from his Cabinet. But why the radio silence from Marcos? What’s taking him so long to speak on this issue? – 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.