In a significant development for international trade, former President Donald Trump announced a trade agreement with the Philippines during a meeting with President Ferdinand Marcos Jr. in the Oval Office at the White House. Later, Trump would proudly take credit for the deal, calling it the “largest deal ever.” He claimed that the United States would take home 90% of the earnings from this deal. The move stunned international markets. The top three automotive companies by sales volume both tripled stock prices, and benchmark U.S. indices finished on a record-high streak.
Trump’s announcement included several key components. He declared that the Philippines should pay a punitive 19% import tariff. Simultaneously, he touted the robust security partnership between the U.S. and the Philippines. Amid the upbeat news, he dropped a bombshell – the Philippines is going to liberalize its market for the U.S. They’re offering zero tariffs on just about everything! This provision of the agreement will do much to improve our trade relationship. It will significantly improve infrastructure connectivity, thereby stimulating economic exchanges between the two countries.
The former president emphasized the potential economic benefits of the agreement, predicting it would create “hundreds of thousands of jobs” in both countries. His sunny outlook resonated with the investing public. This connection was evident in the immediate market reactions after the announcement, which highlighted these two critical areas.
In Asia, markets cheered Trump’s announcement. Japan’s benchmark Nikkei 225 index jumped 1.71% at the open, with the broader Topix index up 1.87%. Shares of Japanese automakers exploded as well, with Honda up 8.42% and Toyota rising by 9.97%. In the meantime, South Korean automaker stocks had a great day, with Hyundai shares up more than 5%, and Kia shares climbing by 7.06%.
The excitement was strongly felt in the broader market in the United States as well. In fact, both the S&P 500 and Dow Jones Industrial Average closed in the green on the day of Trump’s announcement. The S&P 500 gained 0.06%, ending the day at a new all-time high of 6,309.62. The positive sentiment extended beyond U.S. borders, with mainland China’s CSI 300 index up by 0.3% and Hong Kong’s Hang Seng Index gaining 0.63%.
On the campaign trail, Trump promised that Japan would work much more closely with the U.S. He was short on specifics about that partnership during the announcement. Investors once again seemed to be reassured by the general momentum generated by the trade agreement with the Philippines.
This announcement is a momentous step not only in U.S.-Philippines relations, but it has the potential to completely alter trade relations across the Asia-Pacific region. By opening markets and reducing tariffs, both countries stand to benefit economically, potentially leading to increased investment and job opportunities.