PH economy ‘at risk’ from US trade shifts

FEARS of a global recession are growing as United States President Donald Trump enforces new protectionist trade policies, raising concerns about the impact on the Philippine economy.

Economist Cielito Habito stated that global trade has already begun to shrink during a forum held on Friday, May 30, 2025, by the Management Association of the Philippines (MAP) and the Cebu Chamber of Commerce and Industry.

He warned that global value chains are being disrupted and the global economy could contract further, possibly entering a recession. This, he explained, would affect the Philippines more severely than direct US tariffs on its exports.

Habito identified several risks to the Philippine economy:

• Exports to the US may decline;

• Remittance flows from overseas Filipino workers could weaken;

• Tourism inflows may drop; and

• China could dump more goods into Southeast Asia — including the Philippines — especially through e-commerce, threatening local factories and jobs.

Trump’s current policies include raising tariffs on imports, cutting income taxes while relying more on import duties, clamping down on immigration, easing environmental and other regulations and reducing the size of the federal government. These actions are meant to bring manufacturing and jobs back to the US, reduce the trade deficit and strengthen the American economy.

However, Habito pointed out possible negative outcomes:

• Manufacturing may grow without creating jobs;

• Wages and inflation could rise, making the US economy less competitive;

• Inequality may widen under pro-rich policies; and

• The US dollar could weaken if countries move away from using it in global trade.

Philippine performance in Asean

Despite strong growth, Habito noted that the Philippines is missing out on global trade gains. In Habito’s presentation, in 2023, exports made up only 12.7 percent of the country’s gross domestic product (GDP) — far lower than Singapore (108.9 percent), Vietnam (82.5 percent) and Malaysia (57.9 percent).

However, according to the Department of Trade and Industry, total exports accounted for 27 percent of the country’s GDP in 2023.

Habito also said that the Philippines exported $70 billion in goods last year, far below Indonesia’s $201 billion. Even when combined with $37.9 billion in business process outsourcing (BPO) revenues and $38.3 billion in remittances, the total still fell short of its neighbors.

For 2024, the Philippine economy grew by 5.7 percent, second only to Vietnam in Southeast Asia. In 2023, the Philippines led the region with 5.5 percent growth, driven by government spending, election-related activity, tourism, construction and banking.

Still, private investment and exports are slowing due to challenges like high interest rates, poor infrastructure and difficulty in doing business.

Habito said the country’s competitiveness is being held back by structural problems and a lack of reform.

On a positive note, he said unemployment is expected to fall from 4.4 percent in 2023 to 3.8 percent in 2024, while inflation is projected to ease from six percent to 3.2 percent.

Trajectory

Meanwhile, Habito said that the Philippine economy in 2025 is subject to a combination of external and internal factors that could influence its trajectory.

Externally, the nation faces uncertain economic prospects in the United States, marked by unpredictable policy shifts from Trump. Geopolitical tensions also present a significant consideration, including ongoing issues in the West Philippine Sea, the Middle East and the conflict between Russia and Ukraine.

Internally, 2025 is an election year, which typically contributes to higher economic growth. However, this period also brings a politicized budget process. Furthermore, a campaign recess has reportedly stalled crucial reforms. The country also continues to grapple with fundamental human development challenges in areas such as health, nutrition and education.

The MAP forum, held at Seda Ayala Center Cebu, included the induction of new members and discussions on improving management, education and policy reforms to build a more competitive Philippine economy.