US-China trade war seen to benefit PH

Department of Research, Studies and International News 20-04-2025

THE Philippines could benefit from the escalating US-China tariff war, with a 90-day suspension of new US tariffs offering what one economics expert calls a “window of opportunity” to attract global manufacturing and investment.

In an interview, Ronilo Balbieran, a professor at the University of Asia and the Pacific’s School of Economics, said the pause could position the Philippines as a strategic alternative for companies seeking to relocate their supply chains amid rising tensions between the world’s two largest economies.

“This can only be good,” Balbieran said. “This is a chance for the Philippines to position itself as a manufacturing destination amid global shifts. The key phrase here is supply chain relocation.”

United States President Donald Trump announced the pause on the higher reciprocal tariffs on most of the country’s trading partners, including the Philippines.

The country stands out with a relatively low reciprocal tariff rate of 17 percent.

Neighboring Association of Southeast Asian Nations (Asean) economies like Cambodia, Vietnam and Thailand face significantly higher rates, making the Philippines more attractive — at least on paper.

“We’re not a net exporting country. We bleed from trade deficits,” cautioned Balbieran, who is also vice president of economics reform think tank, the REID Foundation. “But since we can’t go lower than where we are now, this is an opening.”

He described the tariff war as a heavyweight bout between the global buyer and the global seller: the United States, with 25 percent of the world’s gross domestic product, and China, with 20 percent.

“It’s a clash of 25 percent versus 20 percent, buyer versus seller. And we’re caught in between,” he said.

Unlike highly trade-dependent nations such as Singapore — with a trade openness index over 300 percent — the Philippines has a more modest index of 60 percent, relying primarily on its domestic economy.

This, Balbieran argued, provides the country with a layer of insulation — and a potential upside.

“If others are in a panic, we’re somewhat shielded. And if America starts buying from us instead of China, then we win,” he said.

Balbieran was skeptical that Trump’s tariff strategy could truly bring manufacturing back to the US but acknowledged the administration’s game plan.

“Yes, it will be more expensive. But Trump’s second strategy is shrinking the government and offering tax cuts. That’s how he plans to make up for it,” he said.

Still, he warned that relocation — whether to the US or the Philippines — hinges on long-term certainty.

“Investment is a long-term decision. No one will move until they see permanent tariff rates. Everyone’s in wait-and-see mode,” Balbieran said.

With China likely redirecting trade toward India, Asean and Russia, Balbieran said the Philippines must act decisively. He pointed to recent policy reforms that make the country more attractive to investors.

“The amendment of the Public Service Act — 100 years in the making — now allows 100 percent foreign ownership in key sectors like telecoms, airports and transportation. That’s game changing.”

He also cited the Create and Create More Acts, which expand tax incentives, particularly for power-intensive industries — historically discouraged by high electricity costs.

“If you’re a power-heavy investor, we now offer additional deductions. That could be the difference-maker,” he said.

Balbieran highlighted coconuts as a potential winner under the new tariff structure, with improved competitiveness against Thai exports. He also noted that electronics and gadget components — already among the Philippines’ top exports to the US — may gain from supply chain shifts.

“It’s about price minus cost. If we lower costs and keep prices competitive, we’re suddenly in the running,” he said.

Balbieran’s message to policymakers: use this 90-day window to market the Philippines as a stable, reform-driven and investor-ready alternative to China.

“Investors aren’t looking for the cheapest place — they’re looking for the surest. And right now, the question is: can we give them that certainty?”