A recent decision by former U.S. President Donald Trump to impose sweeping tariffs across Asian trading partners could have mixed impacts on the Philippines, offering both potential benefits and risks to its manufacturing sector, an industry executive said.
Leslie Lim, President of the Federation of Ecozone Service Providers – Visayas Chapter, said the Philippines initially appears advantaged by a relatively lower tariff rate of 17%, compared to higher rates faced by regional neighbors such as Thailand, Vietnam, China, and South Korea.
“At first, this would give a positive impression, but in the long run, it might still have a domino effect,” Lim warned.
She noted that the Philippines exports many semi-finished products, particularly electronics, to other Asian nations like Japan and South Korea for further manufacturing before final export to the United States.
If these receiving countries reduce their exports to the U.S. due to higher tariffs, demand for Philippine-made semi-finished products would likely decline, she pointed out.
However, Lim highlighted a potential upside for the country.
Higher tariffs on neighboring Asian nations may encourage companies from countries like Vietnam and Indonesia to relocate manufacturing plants directly to the Philippines, which boasts comparatively lower tariffs on finished goods exported to the US.
“This might trigger big furniture plants from Vietnam and Indonesia to return to the Philippines, particularly Cebu, where we were globally known before the previous US recession,” Lim, who is also the CEO of LDL Group of Companies, one of the country’s largest logistics groups, added.
Trump’s tariff decision stems from addressing the US trade deficit with Asian nations, aiming to bolster American industries and reduce dependence on imports.
However, the sudden move has injected uncertainty into the regional trade landscape, creating a complex scenario for the Philippines.
Analysts suggest close monitoring of trade dynamics and proactive policy adjustments will be essential to navigate potential shifts in regional manufacturing and exports.
UBS Investment Bank earlier said it expects the Philippines to remain relatively insulated from global trade uncertainties and retaliatory tariffs, citing the country’s limited exposure to global trade and its domestic-driven economy.
The bank forecasts minimal economic impact, with a potential drag of about 30 basis points on growth, one of the lowest in Southeast Asia.
The Philippines’ low reciprocal tariff rate and limited goods exports to the US contribute to its status as a regional safe haven amid trade tensions.
UBS also sees further rate cuts and easing inflation supporting the economy this year.
Business News Asia