Given a relatively small exports advantage over America, the Philippines may escape US President-elect Donald J. Trump's tariffs threat and even boost its top export sector in case neighboring economies—especially China—are targeted by American trade and investment sanctions, according to the think tank Oxford Economics.
"Increased US-China trade tensions may further benefit ASEAN [the Association of Southeast Asian Nations] and India through trade substitution and trade diversion, as was the case during Trump's first term. However, some countries may benefit more than others," Oxford Economics emerging markets economist Callee Davis said in a report.
In particular, Davis cited that "the Philippines maintains a smaller trade surplus with the US compared to China, Vietnam, Thailand, Malaysia, and India."
While Philippine exports to the US exceed the value of goods it imports from America, its trade surplus of only $4 billion last year is dwarfed by China's $300-billion worth, Vietnam's $109 billion, Japan's $75 billion, South Korea's $55 billion, India's $47 billion, as well as Thailand's $43 billion, as pointed out by Trade and Industry Undersecretary Ceferino S. Rodolfo early this week.
For Davis, such would make the Philippines "less likely to be in the firing line when it comes to tariffs and could benefit from increased US demand for its electronics exports, particularly semiconductors, as its exports become substitutes for exports from other tariffed Asian countries."
Based on an Oxford Economics survey among its analysts in 20 emerging markets, the think tank anticipates a significant risk of upward US tariffs against China and/or the European Union (EU) to positively affect demand for Philippine and Mexican exports, which are substitutes for those from possibly tariffed exporters.
Also, the Philippines and Malaysia "could receive investment in their semiconductor industries, as higher tariffs on China and other regions would make them more attractive destinations," Davis added.
Electronics and semiconductors are the Philippines' No. 1 export commodity, comprising more than half of annual sales.
Oxford Economics' analysts see the Philippines, Hungary, Indonesia, Malaysia, Mexico and Saudi Arabia as having potential to benefit from possible relocation of production from China as well as the EU in the long run.
However, the think tank still expects "some" US tariffs to be slapped against Philippine exports when Trump returns to the White House.
Specifically, the Philippines' electronics and semiconductor industry is also seen by the think tank's economists as having the most potential for the US, under President Trump 2.0, to slap with larger tariffs.
Oxford Economics likewise warned that US tariffs targeting China could slow the mainland's growth, which may spill over to its neighboring trading partners like the Philippines.
"Our analysts are mostly concerned about the implications of slower Chinese growth on demand for their exports of commodities (Russia, Saudi Arabia, Brazil, Indonesia, and South Africa) and electronics (the Philippines)," Davis noted.
A net importer of all the products it consumes, the Philippines sources the biggest share of its imports from China.
The think tank sees Philippine exports to be negatively impacted, through lower demand for intermediate inputs, by the looming tariffs that the US shall impose on its imports from China and the EU.