Being the odd one out is working for the Philippines

By Daniel Moss

GIVE the Philippines its due. The country could emerge as one of the winners from the trade war. Ironically, this reflects shortcomings from an earlier chapter in Asian commercial history.

Victory in the tariff era is relative. Few countries, if any, will come out ahead. Confidence was badly shaken by the vast scale of duties imposed by the White House in April, even if many were suspended for several months after a market swoon. The Philippines has a decent shot at being harmed least. The levy thrust on Manila by US President Donald Trump was 18%; within Southeast Asia, only Singapore fared better.��

It can count its lucky stars that manufacturing never really took off. When supply chains, particularly for electronics, began winding through Singapore, Malaysia, and Thailand in the last decades of the 20^th century, the archipelago was largely overlooked. While the autocrat Ferdinand Marcos — father of the current president — was overthrown in 1986, big problems that discouraged investment remained. Infrastructure was shoddy, corruption was rampant, budgets were shaky, and political instability lingered. (The armed forces mounted a number of failed , the most recent of which, in 2007, ended in a shootout in a top hotel in the capital’s business district.)�� ��

The failure to become an industrial powerhouse may have held back growth during the region’s boom years, but now leaves the Philippines Shipments of goods and services accounted for around 27% of gross domestic product in 2023, according to the World Bank. That compares with Vietnam’s 87.2% and Thailand’s 65.4%. Executives are sensing opportunity. “When buyers compute and see lower tariffs on the Philippines, they will start’’ to buy from us, George Barcelon, head of the Philippine Chamber of Commerce and Industry, told Bloomberg News shortly after Trump rolled out the levies. “Everybody in business has their eye on this.”

Not that the Philippines is invulnerable. The lack of opportunity at home has long meant that the country is a big exporter of human capital. Its citizens perform vital roles in the global economy. Singapore is offering bonuses to retain Filipino nurses, a street near Rizal Park in central Manila has long buzzed with agents hiring for some of the world’s biggest shipping lines, and Filipinos are a big source of foreign recruitment for the US military. Not to mention teachers, construction workers, and nannies. They wire a lot of money home. Remittances have climbed to around 8% of GDP and last year $38.4 billion. Those in the US might be vulnerable to the immigration crackdown launched by Trump, but the diaspora is not dependent on America for employment.

The country notched a fairly strong performance in 2024, with the economy expanding 5.6%. Inflation is under control and interest rates are coming down. But the downgrading of world growth forecasts won’t leave the Philippines unscathed. The peso has weakened this month along with a handful of other Asian currencies. Officials have adopted a pragmatic approach. “It’s when it’s a strong-dollar story driven by safe-haven flows,” Bangko Sentral ng Pilipinas Governor Eli Remolona told Bloomberg News. The good news is that the economy seems to be on its own, more positive track.

Manila still has formidable challenges. While infrastructure has improved, every visitor still has horror stories about traffic. The government also needs to use its wisely.* Officials know they have to invest in education and find ways to boost productivity, as peers did when families started becoming smaller. Tensions between Washington and Beijing in the South China Sea are also a negative. The Philippines, a former US colony and contemporary security partner, has rubbed up against Chinese vessels in recent years.

Politics serve as a distraction. Vice-President Sara Duterte, herself the child of a former leader, proceedings in the Senate over allegations of a plot to kill President Ferdinand Marcos, Jr. Her father awaits trial at the International Criminal Court for crimes against humanity allegedly committed in his deadly war against illegal drugs.

In large part, though, the country does seem to have put the “”�� label behind it. Shrewd leaders and executives will seek advantage from the window Trump’s tariffs have opened.

BLOOMBERG OPINION

*The Philippines’ total to 1.9 in 2022 from 2.7 in 2017. While this is still high compared with Japan, South Korea, and Singapore, it’s significantly less than the 3.0 recorded in 2013.