MANILA (UPDATE 3) -- An official of Fitch Ratings warned that US President Donald Trump's so-called Liberation Day tariffs will cause many countries to fall into recession.

Trump announced on April 2 (April 3 in the Philippines) a raft of new tariffs against many countries that trade with the United States, including some of its biggest trading partners and most important allies.

Olu Sonola, Fitch Ratings' Head of US Economic Research, said that following this, the tariff rate on all imports is now around 22 percent from 2.5 percent in 2024.

"That rate was last seen around 1910. This is a game changer, not only for the US economy but for the global economy. Many countries will likely end up in a recession," Sonola said. 

"You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time," Sonola added.

Other countries have vowed to retaliate against the new tariffs, sparking concerns about a wider trade war. 

According to the White House, for the Philippines, the US Discounted Reciprocal Tariffs were at 17 percent. 

'Liberation Day' recirprocal tariffs

IMPACT ON THE PHILIPPINES?

The US is the Philippines' largest export market. According to the Philippine Statistics Authority, in 2024, the Philippines exported $12.12 billion worth of goods to the US, making up 16.6 percent of the country's total exports for the year, based on a preliminary report released in December. 

The Office of the US Trade Representative meanwhile, said the Philippines exported $14.2 billion worth of goods to the US last year, while the Philippines imported $9.3 billion. The USTR said this meant a trade deficit with the Philippines of $4.9 billion in 2024.

According to the PSA, the Philippines exported $986 million in goods to the US in February alone, making up 15.8 percent of the country’s total exports.

However, the Philippine government has downplayed the effects of the Trump tariffs and said the country may even benefit from higher foreign investment because of them.

“Ayon din po sa DTI [Department of Trade and Industry] iyong impact po nito ay medyo hindi ganoon kalaki, very minimal po (According to the DTI, the impact is not that significant--very minimal)," said Palace Press Officer Claire Castro during a press briefing. 

The DTI said earlier that the 17 percent reciprocal tariffs on the Philippines may have a less substantial impact on the economy compared to other ASEAN nations such as Vietnam with 46 percent tariff rate, Indonesia with 32 percent, and Cambodia with 49 percent.

The Palace official also notes that higher tariff rates imposed in other countries may result in more investments in the Philippines.

“Maaari pa rin din po tayong makakuha ng mga investors mula doon sa mga bansa na may pinapatawan ng malalaking tariff. So, maaari silang pumunta sa Pilipinas, dito sila magsagawa, mag-manufacture, dahil 17% lamang ang pinapataw sa atin,” she said.

(We may get investors from other countries who were slapped with higher tariffs. They may go here, set up manufacturing here because the tariff on us is only 17 percent.)

The Department of Budget said Trump's tariffs may affect the country through a slowdown in external demand as trade volumes and global economic activities decline, higher prices of imported goods and services abroad, higher interest rates, and negative financial market sentiment.

Meanwhile, the DTI also noted that the US remains a crucial export market for the Philippines, accounting for approximately 17 percent of total exports as of 2024.

"Notably, electronic products comprise a significant 53 percent of these exports, and overall, about 10 percent of our total trade involves the US," the DTI said.

The US is also a major source of agricultural imports, representing approximately 20 percent of Philippine supplies. 

The DTI said  Trade Secretary Cristina Roque has already expressed her desire to meet with her US counterpart and is currently awaiting schedule to discuss strengthening the trade relations between both countries.

"Given our interconnected global economy, the Philippines believes that clear and predictable trade rules are essential for sustained growth. We are committed to working closely with the United States to uphold these principles and ensure a mutually beneficial trade environment," the DTI said.

However, the DBM said it expects the Philippines "to withstand the effects of Trump's reciprocal tariffs and the retaliation by US trading partners" given the resilience of the economy and the country's strong macroeconomic fundamentals.

"In any case, still, DBM ensures that resources and the budget has sufficient buffers and programs that can counter the negative effects of global economic uncertainties," the agency said in a statement.

Stock markets around the world sank following the announcement of the new tariff regime. Vietnam, which is heavily reliant on exports, saw its stock market sink around 5 percent as of this posting. Japan, which also exports a lot of goods to the US, saw the Nikkei sink 4 percent as of this posting. The Philippine stock exchange is also in the red.