Finance Secretary Ralph Recto expects the Philippines to be among those “least affected” by US President Donald Trump’s higher tariff policy because “our economy is predominantly consumer driven.”
Recto told the Manila Standard in a Viber message that the US tariff hikes “will not be good for global trade and may affect global growth.”
The government targets a 6 percent to 8 percent gross domestic product (GDP) growth this year. In 2024, the economy grew 5.6 percent, lower than the government’s target of 6 percent to 6.5 percent.
According to Recto, there are opportunities for investment and greater trade with Western countries.
“CREATE MORE will help attract investments in both domestic and export. We’re watching out for opportunities,” he added.
Enacted on November 8, 2024, the CREATE MORE Act transforms the Philippines into an attractive business destination by making the tax incentives regime more globally competitive, investment-friendly, predictable, and accountable
It will enhance the ease of doing business in the country; clarify value-added tax (VAT) rules; provide more attractive tax incentives; strengthen governance and accountability; and make clear transitory rules for pre-CREATE registered business enterprises (RBEs), the finance chief said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said more protectionist policies by a Trump presidency starting January 20, 2025, would discourage some US companies from investing and creating more jobs outside the US.
Ricafort said that a potential trade war between the US and China as well as other countries could slow down the world economy and global trade, which could be a potential drag on exports and imports in the country.
“Any protectionist policies by U.S. President-elect Trump could lead to higher U.S. import tariffs, retaliatory tariffs/trade war that could lead to higher U.S. inflation that, in turn, could lead to fewer future Fed rate cuts and could slow down global trade (exports and imports), and also slow down world GDP/economic growth,” Ricarfort said.
“The proposed reciprocal tariff by Trump could be a threat to Philippine exports to the US, in terms of slower growth and lower market share,” he added.
For his part, Standard Chartered economist and foreign exchange analyst for Asia Jonathan Koh said the Philippines may even benefit from Trump’s move to raise tariffs on imports.
During a recent media briefing, he explained that compared to other countries in the region, the Philippines is “a lot more insulated” from the impact of higher tariffs.
He said the Philippines could also benefit from foreign direct investment (FDI) inflows, as companies look for other areas to invest in.
“The Philippines only [has] a $4 billion trade surplus with the US. So within the region if you were to pick a country that is a potential target, probably a lot of people will pick Vietnam because the trade surplus with the US increased massively,” Koh pointed out.
The US is the biggest export market of the Philippines at $1.127 billion or 17.7 percent share, higher by 23.5 percent year-on-year; followed by Japan (14.9 percent share), Hong Kong (11.4 percent share), China (10.1 percent share), and Singapore (4.2 percent share).
Meanwhile, the US is the 5th largest source of imports of the Philippines in January 2025 at 6 percent share, higher by 2.6 percent year-on-year to $690 million; after China (28.9 percent share), Japan (8 percent share), Indonesia (7.8 percent share), South Korea (7.5 percent share).