By Jomarc Angelo M. Corpuz, Special Features and Content Writer
The Philippines faces both prospects and perils with Donald J. Trump’s second term as United States (US) President. With billions worth of goods and services traded yearly, coupled with a thriving business process outsourcing industry that employs millions of Filipinos, the country’s economic ties with the US run deep. Consequently, any major policy shift in Washington — whether in trade, immigration, or foreign investment — could have ripple effects on the Philippine economy.
These concerns were among the key issues tackled during the third panel discussion at the BusinessWorld Economic Forum on May 22 at the Grand Hyatt Manila, where the conversation weighed in on the implications of Trump’s second term for the Philippines and the broader ASEAN region.
Themed “Tariffs, Trade, and Trump: How a Second Term Could Hit the Philippines,” the discussion gathered experts from both the private and public sectors, including the Department of Trade and Industry Undersecretary for the International Trade Group Atty. Allan B. Gepty, Semiconductors and Electronics Industries in the Philippines, Inc. President Danilo C. Lachica, and GlobalSource Partners Philippines Country Analyst and former Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo.
In his opening statement, Mr. Gepty discussed how the global economy is facing challenges ranging from the effects of the pandemic, fast-paced advancement of technology, adoption of inward trade policies by some countries, and geopolitical tensions that cause a lot of uncertainties for policy makers, investors, and businesses.
Photo by Philippine Star/Russel Palma
“To maintain stability, countries and economies should refrain from adapting and implementing measures that veer away from the general rules of conducting trade. To do so posits uncertainties and, if not well-managed, can send adverse repercussions across our economies, affecting businesses, investments, global supply chain, and even the rules-based trading system itself,” Mr. Gepty added.
Meanwhile, Mr. Lachica spoke at length about the electronics industry’s role as an economic driver in the country despite contractions caused by the pandemic during his opening spiel. He also expressed his optimism on the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Law, which he said declared that the Philippines is open to business once again.
“So, there is hope. In fact, we were going to continue to go to CREATE MORE road shows, but we were kind of distracted by the reciprocal tariffs and the like. But you know, we’re employing about 3 million direct and indirect workers. We expect, notwithstanding the geopolitical wars and the trade negotiations, to see a modest growth in the country this year,” Mr. Lachica said.
For his opening segment, Mr. Guinigundo gave an overview of the effects of Mr. Trump’s tariffs on the US, such as raised prices and a possible recession, as well as what the Philippines can do to take advantage of the relatively low reciprocal tariffs imposed by the US to boost the economy.
“The Philippines has a chance of doing quick and proactive adaptation within the new trade environment. Otherwise, it risks being a passive bystander or a strategic player in upholding the international trade regime. The US will not wait for us to take full advantage of the lower reciprocal tariff or the substantial exemption of certain product lines. Our competitors are still too busy with shifts and enhancing their competitiveness. It’s important, therefore, for the Philippines to sustain the pace of structure and policy reforms,” Mr. Guinigundo explained.
Proactive stance
The most pressing topic discussed by the panel centered on the difference between Mr. Trump’s first and second terms, with comparisons of trade policies, and even the possibility of a free-trade agreement between the Philippines and the US.
Mr. Gepty analyzed the two terms in the context of positioning the country in the Southeast Asia region and on policy direction. He mentioned that the Philippines would like to pose itself as one of the manufacturing hubs of Asia, citing economic reforms by the current and previous administrations, which have led to some companies relocating to the country. On policy, direction, Mr. Gepty noted the country’s desire to expand its market, enjoy preferential market access, and become a bigger player in the global supply chain.
“We have to be proactive, and we have to constantly and closely monitor these developments. That’s why the Philippines is also engaging with the United States because we have to bear in mind that even if the reciprocal tariffs imposed on the Philippines is just 17%, which is lower compared to the other countries in the region, except for Singapore, the fact remains that the global economy is well-integrated,” he said.
Speaking as the representative of the electronics industry, Mr. Lachica downplayed some of the concerns surrounding Mr. Trump’s more protectionist policies’ impact on the Philippines. He reasoned that the Philippines had become a bigger exporter of electronics to the US since Mr. Trump became the president, and he explained that Mr. Trump’s reciprocal tariffs are actually due to trade deficits.
Photo by Philippine Star/Russel Palma
“For us, the posture is to negotiate and maybe bring to recollection and bring to recognition the value of the Philippines as far as the US is concerned. What do I mean? We’re part of the first island chain: Japan, Korea, Taiwan, Philippines. So, we have a strategic value in the Pacific strategy of the United States. It’s not just a matter of the economic value of the dream but of the military strategic value of the Philippines in terms of the US Pacific strategy,” Mr. Lachica added.
Improving sectors
Additionally, Mr. Guinigundo stressed the importance of improving several sectors in the country, such as the investor base, logistics, and human capital, to fully take advantage of negotiations and free-trade agreements that the government can pursue.
“How can we expect people to come here and invest when they know that in 10-20 years, the kind of human capital that we’re going to have, the kind of managers and workers, and even political leaders, are weak in reading, math and science, and their critical thinking is much less desirable. I think the challenge there is really to shape up and do the agenda of developing our industrial base through some kind of policy,” he said.
Photo by Philippine Star/Russel Palma
As for the sectors in the Philippine economy most likely to be affected by trade disruptions, Mr. Guinigundo pinpointed industries with tight margins and tariff-sensitive products like garments and footwear. To help ease the burden on these sectors, he recommended that the government provide market access, reduce the cost of doing business, and improve connectivity.
While Mr. Lachica did commend the administration for designating the semiconductor industry as a priority sector, he did mention several improvements that can help his line of business become a more competitive exporter. He suggested using embedded power supplies to reduce the cost of energy, building industrial parks in the middle of economic corridors to help with logistic costs, and improving the labor force to remain competitive with neighbors.
Similarly, Mr. Gepty advocated for the alignment of the Philippines’ industrial and trade policies, explaining that the endgame of a robust industrial sector is to export more products to other countries.
“Nowadays, we have to bear in mind that, because of the supply chain, technically, there is no such thing as made in one country alone. So, one product is designed in America; it is assembled in another country; owned by one company or another, with products, components, and elements being supplied by different companies. So, for the Philippines, we are very particular about that because we want to level up when it comes to our participation in the global value chain,” he explained.
As the world waits and sees how a second Trump term might unfold, the message from the panel was clear: the Philippines must be proactive, strengthening its industries, investing in people, and staying engaged with key partners to potentially turn global uncertainty into opportunity and make sure it doesn’t get left behind.
