By Luisa Maria Jacinta C. Jocson and Aubrey Rose A. Inosante, Reporters
THE SECOND TERM of US President-elect Donald J. Trump could add more uncertainty to the Philippine economy, which could possibly impact trade prospects, financial flows, and monetary policy, analysts said.
However, the Philippines, which is heavily reliant on the US for business and economic activity, could also stand to gain from some of Mr. Trump’s policies, they added.
Mr. Trump is set to be sworn in as US president on Jan. 20. For his second term, he has vowed to impose tariffs of up to 60% on imports of Chinese goods and 25% for Canadian and Mexican imports, as well as a 10% universal tariff.
Finance Secretary Ralph. G. Recto told BusinessWorld that it is “too early to tell” what would be the economic implications of Mr. Trump’s policies on the Philippines.
“For now, there’s a lot of uncertainty. Having said that, there are also many opportunities,” he said in a Viber message.
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said that the economic impact of Trump 1.0 versus Trump 2.0 will be more global.
“Remember that during his first term he was focused mainly on punitive trade measures against China. This time around, he seems to be entering office with a more global anti-trade, protectionist agenda,” he said in an e-mail.
The International Monetary Fund (IMF) in its latest World Economic Outlook update warned about the “intensification of protectionist policies,” citing a “new wave of tariffs.”
These could “exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and disrupt supply chains, while also increasing inflationary pressures.”
“The impact of such policies would unfold differently across countries, influenced by trade and financial linkages, and would depend on the magnitude and nature of policy changes,” an IMF spokesperson said in an e-mail.
OPPORTUNITYMr. Recto, however, said he does not expect the US to impose very high tariffs on imports from all trading partners.
The United States is typically the top destination for Philippine-made goods. In November, exports to the US were valued at $969.09 million, accounting for 17% of the total export sales, data from the local statistics authority showed.
The tariffs could also present as an opportunity for the Philippines, Mr. Recto said. “In addition, western companies operating in China and Taiwan may move their operations to the Philippines.”
The recently passed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act could encourage investors to move to the Philippines, he added.
“It brings some certain level of comfort to me, however, that the economic team of (Mr. Trump) recently harped on a gradual application of additional tariffs that would give more time for different economies to adjust and recalibrate their own policies,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc. (UnionBank), said.
The Philippines is also not as reliant on exports as its neighbors, Mr. Chanco said.
“As such, should the future Trump administration push through with his campaign pledge to levy wholesale tariffs on all US imports, Philippine economic growth is unlikely to be as affected as its more trade-dependent neighbors,” he said.
“That being said, there’s no escaping the fact that the US remains one of the Philippines’ main export markets, so some pinch would be inevitable,” he added.
First Metro Investment Corp. Head of Research Cristina S. Ulang said the Philippines could benefit from “friendshoring” given its decades-old alliance with the US.
Friendshoring is defined as a “growing trade practice where supply chain networks are focused on countries regarded as political and economic allies,” according to the World Economic Forum.
“Hopefully, if Mr. Trump’s attitude towards China would be more on bringing down the tensions, that should improve our trade,” Employers Confederation of the Philippines and President Sergio Ortiz-Luis, Jr. said via phone call.
“We have lost a lot with China in terms of trade, in terms of tourism, and investment,” he added.
At the same time, the Philippines’ Information Technology and Business Process Management sector may face challenges but also opportunities under Mr. Trump’s second term.
“While a second Trump presidency may introduce new hurdles, such as potential shifts in outsourcing trends or tighter trade regulations, the demand for high-quality, technology-enabled services remains unwavering,” Jack Madrid, chief executive officer and president of the IT and Business Process Association of the Philippines, said.
“Protectionist policies, regardless of their origin, challenge us to innovate, upskill, and fortify our value proposition,” he added.
TIGHTER CONTROLSMeanwhile, analysts warned of the impact of Mr. Trump’s tighter border controls and harsher immigration measures on remittances.
“At this stage, I’m more concerned about the remittance channel. We can’t hide from the fact that there is a not-insignificant number of undocumented Filipinos in the US,” Mr. Chanco said.
“If their status in the country is further compromised by the next administration’s immigration policies, then remittances from one of the country’s largest sources may be impinge.”
Mr. Asuncion also noted that remittance inflows are a “significant economic leg” of the Philippine economy. UnionBank expects overseas Filipino worker remittances to rise by 3% to $35.5 billion this year.
“Downside risk to the remittance forecast would emanate from President-elect Trump’s tighter immigration policy, likely to reduce the number of unauthorized Filipino migrant workers in the US,” Mr. Asuncion said.
“Nonetheless, we maintain our view that the bulk of the remittances from the US are sent by nearly two million legal Filipino migrant workers all over the US.”
Economists also flagged the impact of these policies on the currency, inflation and monetary policy.
Markets are pricing in the inflationary pressures that could stem from Mr. Trump’s plans for tax cuts and tighter tariffs, which could slow the US central bank’s easing cycle.
GlobalSource Partners country analyst Diwa C. Guinigundo said the US Federal Reserve may keep policy rates higher for longer.
“Since Mr. Trump’s tax and tariff policies are potentially inflationary, the US Fed may not be as sanguine as to be more aggressive in its easing policy,” he said.
The Fed began its rate-cutting cycle in September, slashing rates by a cumulative 100 basis points (bps) last year.
“If this is the case, and with potential weakening of the peso this year, the BSP might be more careful in abandoning its fundamentally tight monetary policy,” Mr. Guinigundo said.
The peso fell to the record-low P59-per-dollar level thrice last year. Several economists, multilateral institutions and think tanks have forecasted that the local unit could breach the all-time low this year amid the stronger dollar.
“A stronger-than-expected US economy supports the strong US dollar narrative,” Mr. Asuncion added.
Despite this, Mr. Chanco said this is unlikely to significantly impact the BSP’s own rate-cutting moves.
“I doubt, at this stage, that this will materially impact the BSP’s easing cycle, though, as the Monetary Board has plenty of room to ease — with inflation now subdued — given how aggressive its tightening cycle was in 2022-23,” Mr. Chanco said.
“It’s worth remembering that unlike the US, the Philippine economy is clearly in the midst of a cyclical soft patch,” he added.
Mr. Asuncion said that within-target inflation should also allow the central bank to “ease its policy rate further and support its implicit goal of supporting growth past 6% and more employment.”
The BSP, which cut ahead of the Fed in August, delivered a total of 75 bps worth of cuts last year. This brought the policy rate to 5.75%.
Mr. Asuncion said they expect BSP to cut rates by another 75 bps this year to bring the benchmark to 5%.
“Front-loading the bulk of the three rate cuts this year of 25 bps each in the first half of 2025 would be appropriate amid offshore challenges likely to persist,” he added.
