What could the Trump Presidency mean for the Philippines?

The world is heading into 2025 with high uncertainty. And no factor has contributed more to this unpredictable environment than the reelection of Donald Trump as the United States President.

The US is the world’s biggest economy ($27.4 trillion), the biggest importer of goods ($3.17 trillion), the second largest exporter of goods ($2.02 trillion), and the largest source of foreign direct investments (FDI, $404 billion).

The massive size of its economy and influence in global trade and investment means any major shift in US government policies is likely to have a significant impact on the global economy, including the Philippines.

The US and the Philippines have developed a strong economic relationship over the years. In 2023 alone, the US was the Philippines’ top export destination ($11.5 billion), biggest source of overseas Filipino remittances ($13.7 billion), largest source of development assistance grants ($615 million), fourth biggest source of FDI inflows ($113.1 million), and fifth largest import source ($8.4 billion).

Based on Trump’s pronouncements during the campaign, there are three policies that could potentially affect the Philippines.

Stop outsourcing of jobs

Trump has pledged to stop the outsourcing of jobs to generate local employment. This could negatively impact the IT-BPO sector in the Philippines, which employs some 1.7 million Filipinos and generates at least $30 billion in revenues annually, more than half from the US.

Tariffs

Trump has floated the idea to impose a blanket 10 to 20 percent tariff on imported goods from countries where the US has a trade deficit with. This will make our export goods such as textiles, garments, and coconut oil more expensive in the US, and likely lower demand and reduce earnings for these industries.

Trump has also threatened to levy as much as 60 percent tariffs on all imported goods from China, which would indirectly affect the country, especially exporters linked in the global value chain. To illustrate: exporters of electronic parts to China as inputs for the manufacture of smartphones would likely suffer from lower demand.

But high tariffs on China could also bring potential benefits, as US companies that face higher costs due to tariffs might look for alternative and cheaper sources of inputs, or even move out and establish production factories in alternative locations.

This is where the Philippines could assert itself as a viable option. However, it remains to be seen whether recent reforms such as CREATE MORE Act and amendments to liberalization laws would make us an attractive investment destination at par with Vietnam, Indonesia, and Malaysia.

Strict immigration policy

Trump has threatened a massive deportation of illegal immigrants in the US, ending automatic citizenship for their children. Currently, there are an estimated 370,000 undocumented Filipino migrants in the US. This policy is likely to lower remittances and reduce the income of OFW families at home. It could also mean a more stringent vetting process for those seeking job opportunities in the US.

Overall, early assessment shows that the net impact of Trump’s campaign agenda would be negative for the Philippines. Nevertheless, we’ll conduct another review of his policies six months after he assumes office in January.

While there is much uncertainty heading into next year, the key takeaway for the government is to make our economy more resilient by focusing on things it can control.

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This includes diversifying the country’s growth drivers by investing in the agriculture and manufacturing sectors. Developing the agricultural sector through improvements in the supply chain is important for food security and managing food inflation. The government could partner with the private sector in building common warehouses, cold-storage facilities, and farm-to-market roads to minimize post-harvest losses.

Strengthening the manufacturing sector, including small and medium enterprises (SMEs), could generate quality jobs. The government could invest further in Shared Service Facilities of the Department of Trade and Industry which provide SMEs access to technology and equipment to improve their productivity. Ramping up reskilling and upskilling programs with universities and industries can improve the skills of Filipino workers.

We should also improve our position as an investment destination for manufacturing companies, particularly those that can transfer technology and know-how to local firms. The government should continue addressing ease of doing business, particularly the burdensome process of permit approval and extra fees imposed at the local level. Equally critical is the need to lower the cost of doing business, like high power rates and unreliable internet connectivity which hampers digitalization.

Lastly, it is crucial to strictly monitor budget utilization and program implementation of national government agencies to ensure that the limited resources of the government are spent prudently.

As the saying goes, the best way to predict the future is to create it.