DONALD Trump’s shock victory as the new President of the United States is a risk factor for China and trading partners like the Philippines once the world’s largest economy institutes a protectionist policy, credit watchdog Fitch Ratings said.
His plan to “rebuild the American economy by fighting for free trade” reflects his dissatisfaction with some existing free-trade deals, Fitch said in a report released Friday.
Trump has threatened to tag China as currency manipulator and place high tariffs on Chinese imports, while criticizing the US-Korea Free-Trade Agreement, the debt watcher noted.
Fitch expects China to take counter measures including, but not necessarily limited to, tariffs on US imports if more aggressive tariff policies were pursued.
“A ‘trade war’ would have adverse consequences for GDP growth and inflation in both countries, and could lead to depreciation of the RMB and would create financial market risk aversion, which would likely spill-over to other emerging markets,” it said.
“A major shift toward trade protectionism in the US could have a significant impact on Asian economies,” Fitch noted.
Asian exporters have become less directly dependent on the US over the last two decades, and have become the largest market for China—accounting for almost a fifth of its exports.
That is why a disruption in trade between China and the US would have ramifications for the region, according to Fitch.
“Countries including Korea, Singapore, the Philippines and Thailand are significant suppliers of intermediate goods—such as electronic and automotive components—to China,” it said.
China is the third largest buyer of Philippine exports, after Japan and the US. The Philippines shipped $4.438 billion worth of goods to China as of September this year.
‘Inclusive growth to shield PH’
In a separate statement on Friday, the Department of Finance said an inclusive Philippine economy would shield the country’s most vulnerable sectors from new market uncertainties triggered by a surging worldwide backlash against globalization.
Finance Secretary Carlos Dominguez 3rd said the government is advancing a three-pronged strategy to improve budget efficiency and transparency, strengthening tax administration, and reforming tax policy to shield Filipinos from market volatilities spawned by an emerging pattern of protectionism across the globe.
“We should seize the ‘Cinderella moment’ to quickly move the fiscal reform package and create a buffer for the most vulnerable among our people,” he said.
“Capital is abundant and interest rates are low. Inflation is benign and our credit ratings impressive for an emerging economy. Regional support is strong and business confidence high,” he said.
“When people see their hard-earned tax payments used properly, public support for tax reform will improve,” he added.