THE PHILIPPINES is seen to be well-insulated from tit-for-tat retaliatory tariffs, analysts said, as its trade balance and currency are not likely to be significantly affected compared with its regional neighbors.
“Here in the Philippines, we are the ones importing more rather than exporting. That’s why we think we’re kind of insulated in terms of tariffs,” Sun Life Investment Management and Trust Corp. Chief Investment Officer Ritchie Ryan G. Teo said.
US President Donald J. Trump’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, Reuters reported. (Read related story: “Trade wars erupt as Trump tariffs take effect”)
Mr. Trump has also pledged to impose reciprocal tariffs on every country taxing US exports.
Standard Chartered Chief Economist and Head of FX for ASEAN and South Asia Edward Lee said there is “increasing uncertainty” coming from the United States’ policies.
“The uncertainties are essentially driven by Trump’s policy. It’s not just the tariff policies, it’s also his immigration policies,” he said.
He said the US is seeking to impose tariffs on a “broader and deeper scale” compared with Mr. Trump’s first administration.
“If it was just on China, as we have seen in Trump 1.0, some of our Southeast Asian economies benefited from reallocation of exports, and from reshoring of production capacity.”
“In the medium term, I think ASEAN (Association of Southeast Asian Nations) will still receive a lot of foreign direct investment (FDI), but in the short run, because probably now that the tariffs are a lot broader, and deeper, this could pose downside risks to global growth.”
Mr. Lee said these policies could result in a “divergent effect.” “It’s about sequencing. Which of the effects of these policies could come first?”
“There’s a 10% tariff already effective for China but the rest is sort of March or April, potentially later. On the immigration side, we don’t have data yet on the employment authorization documents so we shall see.”
Standard Chartered Bank economist and FX (foreign exchange) analyst Jonathan Koh Tien Wei said the Philippines is more insulated than most of its neighbors.
“For the Philippines, 75% of the economy is driven domestically, versus the likes of Singapore, which is 60% is driven externally. So, very clearly, (the Philippines) is a lot more insulated.”
Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said that the Philippines’ trade channels would not be hampered.
“Trade policy might not be impacted that much. We are definitely a consumer-heavy type of gross domestic product (GDP),” he said.
The US will also likely direct its tariffs to economies with significant trade surpluses, Mr. Koh Tien Wei said.
“If you look at who the US is targeting — Canada, Mexico, China, the EU (European Union) — those are basically the top few countries with the most trade surplus with the US,” he said.
The United States is the top destination for Philippine-made goods. In 2024, exports to the US were valued at $12.12 billion or 16.6% of the total.
On the other hand, the value of imports from the US stood at $8.17 billion or 6.4% of total imports.
“Even if you tax 100% tariffs, it’s only going to get $4 billion. It is nothing in the scheme of things,” Mr. Koh Tien Wei said.
“Within ASEAN, for the Philippines, there’s no need to basically look at it as much because you’re just not going to get so much revenue from it. So, that’s a bit more insulated from that perspective.”
The Philippines not being a primary target for tariffs could also work in its favor and attract the reallocation of investments.
“What I’m hearing anecdotally is a lot of companies from Korea and Taiwan are actually looking at the Philippines as an alternative destination,” Mr. Koh Tien Wei said.
“You also benefit a bit from the FDI inflows as well just because it is probably safer here. You will not get hit by tariffs. So those things actually help the peso to potentially outperform in this kind of environment.”
Latest data from the central bank showed that FDI net inflows rose by 4.4% to $8.6 billion in the January-to-November period. About 10% of investments came from the US.
Meanwhile, the peso is also not expected to be as affected by trade jitters.
“In terms of the peso, in the strong Trump trade environment, which is basically a stronger dollar environment, we think the peso actually outperforms the rest of the region,” Mr. Koh Tien Wei said.
“Now, outperformance doesn’t mean that it appreciates against the dollar, but it depreciates less than other regional currencies. The reason for that is the peso is still a high yielder versus the rest of the region.”
The Development Budget Coordination Committee expects the peso to average from P56 to P58 against the dollar this year.
“When you think in terms of the Trump trade, it’s a strong dollar. But every time he delays, since the start of the year actually, you see, the dollar can soften like that also. The Trump trade will be a very volatile factor this year,” Mr. Lee said. — Luisa Maria Jacinta C. Jocson
