A Seat at the High Table

US President Donald Trump announced that a tariff agreement with Vietnam has been secured. In exchange for zero tariffs and a 45 percent tariff on transshipments via Vietnam, our Association of Southeast Asian Nations (ASEAN) neighbor’s exports to the US will face a tariff of 20 percent — a significant discount from the initial level of 46 percent. This is the first tariff deal secured by an ASEAN member.

The Vietnam deal is also ahead of the 9 July expiration of the postponement of the reciprocal tariffs that President Trump threatened against his major trading partners.

To date, the US has signed trade agreements with the UK and a preliminary agreement with China. Everyone else, including Japan and other ASEAN members, is still negotiating a deal.

When the reciprocal tariffs were announced during Liberation Day, there was a call within ASEAN to negotiate as a bloc. However, Vietnam and Cambodia broke ranks and decided to negotiate bilaterally with the US.

Being a regional bloc with principles based on consensus, the ASEAN agreed to allow bilateral negotiations with the understanding that it should not harm members. Another factor to consider is that China also does not want to be harmed by bilateral agreements between ASEAN members and the US.

Regardless of how he is presented in mainstream media, Trump is an amazing world shaker.

His divide-and-conquer approach has truly upended many of the belief systems and rule-based order that the world as we know it is built upon. His policy interventions have maximized the economic and political power of the US.

But where does that leave the Philippines? In the table of reciprocal tariffs, the Philippines had the second-lowest tariff level in ASEAN at 17 percent. Whether we like it or not, the entry of exports into the US is no longer going to be cheap.

At the minimum, we can argue that reciprocal tariffs would be at 10 percent, and thus, if we fail to negotiate a better deal, we may be able to report that we still have a lower tariff versus Vietnam.

This is a false comfort though, in my opinion since it renders our products even more uncompetitive and disincentivizes the manufacturing sector catering to the export sector. Perhaps additional tax incentives would make them feel better, but competitiveness cannot be based on price alone.

Admittedly though, the Philippines does not really have much of an economic leverage in negotiations. While exports to the US are significant relative to other trading partners for the Philippines, relative to the total trade of the US, the Philippines is not significant. The same is true for imports. If this is the case, what can we offer?

The most protected goods we have are in the agricultural sector, so if we offer zero tariffs on US imports (e.g., chicken, pork, rice, etc.), consumers may stand to benefit, but this may affect key food manufacturers and local farmers.

President Trump did mention that the Philippines has a strategic value for the US. This may mean that what we can offer is access and logistical support in the region for US military assets. Understandably, this has legal and constitutional ramifications but in negotiations, everything is on the table.

We may not like this scenario, but the geopolitical dynamics have changed since the pandemic and the art of the deal is in fashion.

Our neighbors have shown that they will put national interests ahead of regional interests, which is a fair tactic. We need to be on our feet and learn quickly how to play individual-based games and not just collaborative games if we are to earn a seat at the high table.