19% and 0% tariff: Insult or Boon?

Surprise, surprise! The Philippine delegation to the US led no less than by President BBM was surely surprised when instead of seeing a reduction of the initial “Liberation Day” announcement of Trump’s 17-percent tariff on our exports to the US it was unexpectedly increased to 20 percent on the eve of the visit.

This was nudged down by only one percent to 19 percent at the conclusion of the much ballyhooed visit by our highest level trade mission. This miniscule reduction versus the zero percent on US exports to us has naturally become the flashpoint for more grumblings, particularly by anti-administration politicians who proclaim loudly that the tariff merry-go-round is an “insult” to the Filipino people.

Unquestionably, it was most definitely a surprise, very unpleasant and indubitably unexpected by us. Our economic managers’ lofty expectations were reinforced by earlier meetings with Secretary of State Marco Rubio and Defense Secretary Pete Hegseth where both officials echoed the nostalgic sentiments of our long history.

In fact, President BBM’s trip to Washington had been hailed as the first visit of a Southeast Asian leader to Trump this year which demonstrated the “special relationship” between the US and the Philippines. After all, haven’t we been the dutiful and loyal “little brown brother” of Uncle Sam since the turn of the 19th century, interrupted briefly only by the Japanese invasion during World War II and the interregnum of the pro-China Duterte years?

So with such lofty expectations on our part, we can only scratch our heads at this point and ask, what happened? But is it really such a big letdown? Maybe so for some, but let’s try looking at this issue from another perspective, a sober and realistic assessment on what is in it for us given our current situation.

Perhaps most critically, the redeployment capability of US firepower in close proximity to China and the region’s vital shipping lanes that can be easily defended and readily installed in the various EDCA sites in the event of a “hot war” between China and the US is crystal clear a strategically important defensive hedge for the West.

Albeit admittedly, also very much for us as well, what with the irritatingly aggressive islet by islet invasion, bullying tactics against our navy and complete disregard by China of our sovereign territorial and economic rights over large swaths of the West Philippine Sea which we have been utterly defenseless to stop.

History has shown that in an adversarial situation between two opposing forces, the side with the capability to effectively defend and attack if need be always wins out in the end. We have a choice between China and the US in these two superpowers’ quest for supremacy in Asia. Neutrality as a defensive tactic to my mind is a myth. We have no choice but to pick a side, hopefully, the winning side.

The US has committed to pumping $21 billion into infrastructure, green energy and health care; a $60-million aid package in support of maritime security, energy and economic growth programs; and immediately after we were hit with back-to-back typhoons and unrelenting floods, P13.8-million in relief aid.

Compare this to China’s pledge of $30.5 billion in aid and investments 10 years ago of which only $700 million has materialized to date. With the current WPS brouhaha, I doubt the balance is forthcoming.

No matter which side of the political fence you are on, surely it cannot be denied that this much needed defensive armor that the US has provided us, given our sorely lacking self-defense capabilities, can and should be considered to be a boon to us. Stability in the business climate, particularly for potential foreign investors and the economic spin-offs from the EDCA sites, are unarguably positive developments that can boost our GDP.

Kibitzers on the bench have harped on why only 1 percent compared to Indonesia and Vietnam which were slapped with 19 percent and 20 percent, respectively, both coming off much higher tariff rates to begin with, at 32 percent and 46 percent, respectively?

Well, it’s been reported that Indonesia has committed to $15 billion in US energy imports, $4.5 billion in agriculture, and to purchase 50 Boeing jets. Vietnam, on the other hand, has pledged to tighten its controls on transshipped products which have enabled China to skirt the US’ ban on them. As far as our quid pro quo is concerned, beyond more nurses who are seeking greener pastures and green bucks, I don’t think we have much to offer.

Finally, there is always the never-ending hope that our negotiating trade team will somehow wrangle more concessions and ensure that critical products that our farmers grow will not be included in the 0-percent tariff on US products. Let’s keep our fingers crossed.

So given all the above, folks, is the tariff merry-go-round an insult or a boon?

Until next week… OBF!