• Duterte and the Donald: It won’t be hunky-dory

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    Ricardo Saludo

    THESE days media brims with headlines likening President Rodrigo Duterte to new US President Donald Trump, and saying the tough-talking, skirt-chasing men like each other and should improve Philippine-American relations.

    Time for reality check.

    First, the brash style of both leaders, quick to snap back at any criticism, seems more likely to spur squabbles than quiet diplomacy.

    Sure, Trump does not have the baggage of his predecessor Barack Obama, whom Duterte cussed over US criticism of his anti-drug campaign. But if bones of contention do come up between Manila and Washington—and they will—Trump might not have the reserve of Obama, merely calling Duterte’s four-letter words “colorful.”

    The smart money would set aside the buddy-buddy talk and look closely at potential policy swings under President Trump, and assess how they may affect the Philippines.

    And after analyzing possible impact, map out action plans for country or company if the Donald quacks. Are you listening, Malacañang?

    Issue No. 1: Protectionism
    Throughout his campaign and even after he won, President Trump has threatened to impose punitive tariffs on imports from China, which he blames for stealing American jobs. On his first full day in office, he signed an executive order withdrawing from the Trans-Pacific Partnership trade deal negotiated over a decade.

    Japan’s Nomura investment bank cited South Korea and the Philippines as the big losers in Asia if Trump clamps down on foreign goods and services.

    If Trump uses levies, restrictions and suasion to pressure US businesses into buying less and bringing back jobs from abroad, three key Philippine sectors would suffer:

    Electronics exports, the country’s top manufactured export, much of which goes into goods exported to the US

    Business process outsourcing, which has fueled property development and consumer spending — two major drivers of Philippine growth

    Remittances from overseas Filipinos, who may be adversely affected by Trump’s plan to restrict immigration and send home illegal immigrants.

    That doesn’t even take account of a possible trade war between China and America. It would wreak havoc on markets, currencies and global growth, with some economists even predicting recession. Even discounting that worst-case scenario, an export slump would make China buy less from and invest less in its Asian neighbors.

    Issue No. 2: Immigration restrictions
    Nomura estimates that 35 percent of all overseas Filipino workers employed abroad are in America, remitting 31 percent of all OFW remittances of about $27 billion a year — nearly one-tenth of our gross domestic product.

    Some 30,000 Filipinos a year move to the states, and an estimated 3.7 million are now there. Imagine what impact, say, a 10 percent reduction in annual emigration would have, along with the deportation of illegals.

    Beyond the economic impact, there’s the emotional pain of Filipino families kept or torn apart by immigration restrictions. If such anguish erupts, President Duterte cannot but speak up for those Pinoys, as every Philippine leader has had to do when even one OFW was in distress.

    Issue No. 3: The almighty dollar
    World financial markets, especially currencies, will be unsettled and volatile for a time, as holders of mammoth assets and cash ponder what to buy, sell or hold amid the shifting political, economic and geopolitical landscape.

    Besides Trump trade and economic initiatives, the UK’s “Brexit” from the European Union adds to the worries, along with Middle East conflicts, which affect world oil supplies and prices.

    The dollar tends to act as a fulcrum for so many valuations and trades. It has been rising, due to the US Federal Reserve’s planned hike in interest rates, and the recent positive sentiment toward Trump’s victory. He is seen as boosting American business with protectionism, tax reforms, deregulation, and massive infrastructure outlays.

    Already, at least one bank is predicting an exchange rate above P50-to-$1 soon. Add to that oil’s gyrations, which saw crude drop below $30 a barrel less than a year ago, then rally above $50 last month. A Reuters poll of petroleum traders forecasts $57 average price this year, with one prediction hitting $83.

    With dearer oil priced in costlier dollars, the inflation picture won’t be pretty, and the Bangko Sentral may have to raise interest rates to rein in price increases as well as support the peso.

    And here’s the spanner in the works: President Trump’s avowed wish for China to let its renminbi strengthen against the greenback, which helps US exporters. Good luck getting the currencies to go one’s way, wherever it is.

    Issue No. 4: America vs China
    What do you think would happen if the US Seventh Fleet tried to stop the People’s Liberation Army naval and air forces from going to the military-capable facilities the PLA built on reclaimed islands in the South China Sea?

    That’s what Trump’s Secretary of State Rex Tillerson said he wanted America to do during his confirmation hearing at the US Senate: “We’re going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed.”

    Right. And of course, Beijing is supposed to cry uncle, roll over, and play dead. Actually, that’s probably what the rest of Asia would do if ex-Exxon CEO Tillerson gets his reckless way.

    On Monday, the White House Press Secretary Sean Spicer said the US would “make sure that we protect our interests” in Asia’s tension-steeped waters. That same day, Defense Secretary James Mattis oversaw 31 bombing sorties against Islamic State forces in Iraq and Syria.

    Now, whether protecting US interests in Asian waters means the Seventh Fleet flexing missiles or the Donald doing a deal with the Chinese, the region is sleeplessly awaiting.

    Meanwhile, President Rodrigo Duterte should call his second full National Security Council meeting to discuss what the country should do if America and China get nasty—or bloody.

    It has to be more than just two Presidents exchanging babe stories.

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    1 Comment

    1. Good article Mr. Saludo. Indeed there are many uncertainties with Trump in the Presidency. Hang on for the ride.