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Central bank official downplays initial impact of US-China trade spat

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China steel
A June 6, 2013 photo shows red-hot steel being flattened in the hot rolling plant at the Baosteel steel mill in Shanghai, China. -- AFP

THE IMPACT of the escalating trade row between the United States and China should remain “negligible” for now, a senior central bank official said, noting that Philippine reliance on the affected goods has been “negligible” so far.

The US imposed tariffs starting July 6 on $34 billion worth of goods brought in from China. In a Reuters report, China said it will “retaliate” which, in turn, will be met in turn by countermeasures from Washington.

For Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo, the Philippines has little to worry about as Washington and Beijing slap each other with steeper import duties, but said its impact could be stronger down the road.

“On first approximation, looking at the items that will be affected — that means aluminium, iron, and steel… What we import and export from the US and from China are very negligible, maliit lang. That’s the first-round effects, wala masyadong impact sa atin,” Mr. Guinigundo told reporters yesterday when sought for comment.

The US was the top destination of Philippine exports as of end-May, accounting for 15% of the total, according to the Philippine Statistics Authority. The same period saw China as the biggest source of imported goods at 18.9% of the total.

Global research firm Natixis said in a report that the escalation of the US-China tariff showdown has “caused an abrupt fall across various stock markets” and led to capital outflows and weaker currencies for emerging market economies, which include the Philippines.

Mr. Guinigundo explained that the trade spat between the world’s biggest economies could eventually dampen overall external trade and could stunt economic growth should it persist for a longer period.

Kapag umabot ka na sa second and third round when the economic performance of the countries involved like China, Japan and even the US is considered, then the impact could be more significant,” the BSP official said.

“If trade gets constricted… your net exports will go down; that will pull down your growth. If growth is pulled down, there’s a lot of ramifications when that happens.”

Still, the central bank official said that the Philippines may have breathing space with more diversified markets for its exports as well as other sources for its import needs.

“The export market has been diversified actually with veering away from US and Japan in favor of intra-ASEAN trade. That has become very important,” Mr. Guinigundo explained. — Melissa Luz T. Lopez