The financial markets had been anticipating much from the recent inauguration of President Donald Trump. And with the event over, the question on the markets’ minds is — what’s next?

Looking back at his initial declarations after winning the 2024 elections, the current features of the Trump administration can be summarized by the Three Ts, namely, tariffs, taxes and threats.

During his campaign, Trump proposed imposing tariffs on US imports from Canada, Mexico and China.

He was also keen on extending the tax cuts granted during his first term. And lastly, the biggest threats issued were to make Canada the 51st US state and to take control of Greenland and the Panama Canal.

Just this week, he was true to his word and drew first blood by announcing the imposition of a 25-percent tariff on selected US imports from Canada and Mexico and 10 percent on imports from China.

Canada was quick to retaliate with its tariff hike on US exports to their country, and China followed.

And just as swiftly came the announcement by President Trump of a month-long pause on the tariff hikes — all this within a matter of days.

This tariff slugfest has made investors raise their eyebrows and be ever more curious about how the economic drama will unfold.

While exciting to watch, Filipinos need to take a step back and assess what do about the 3Ts of Trump and what they mean for the Philippines. While these are issues affecting the global order, the hard truth is the Philippines is a small economy and its current offering of goods and capital do not affect global economic prices.

For the Philippines, there is only one T when factoring in the three Ts of Trump 2.0, and that is transmission.

The main transmission mechanism for any external event, whether it is Ukraine-Russia or Trump 2.0, is the exchange rate of the peso. The peso-dollar rate, i.e. the USDPHP, reflects the effect of such policies and like the stock market, expectations get priced in rapidly. And this is why we saw the peso-dollar rate fluctuating wildly over the past two months.

But is there reason to fear the 3Ts of Trump 2.0 as the volatility of our currency suggests? In the short term, not really. Just focusing on the risk of US hiking tariffs on major trading partners is not just about protecting US-based industries.

Revenues from higher tariffs are also intended to fund the planned extension of tax cuts and stabilize the wide fiscal deficit of the US. Looking at it through this lens, targeting almost $12 billion of Philippine exports to the US in 2023 with high tariffs does not seem to be a very optimal use of resources. Our exports and any revenues that may be squeezed from them are just pocket change for the US.

The long term, however, may be a different story for tariffs. It is not the tariffs that we should be directly concerned about but the regional trade policy behaviors that they may trigger. If exports from the rest of the world cannot enter the US as smoothly as before, they will find other markets. (To be concluded)

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Jomar Lacson is the head of Macroeconomic and Sustainability Research at ATR Asset Management. He loves sharing his research experience and knowledge as a professor at De La Salle University. These days, he supplements his market and academic research with the two-wheeled exploration of urban environments, seeking empirical evidence and stories of growth, risk, and social dynamics in the economy.