The Philippines is seen as safe from the repercussions of US President-elect Donald J. Trump's economic agenda, although the country faces greater risks from escalating tensions related to domestic politics as well as its territorial dispute with China, according to think tanks.
"Frictions between Manila and Beijing have intensified in recent months, with frequent tussles between Philippine and Chinese forces. The risk of China taking further action is significant, not least as the stakes appear much lower than in the Taiwan Strait. China will ask whether an incident in the South China Sea would merit a US response, and has a sense that its prestige is at stake—perhaps seeing the Philippines as a 'domino' that may fall," Hong Kong-based risk mitigation and security consulting firm Steve Vickers and Associates (SVA) warned in a December 2024 report.
"A crisis in the South China Sea could still spiral out of control. The deployment of US Typhon and HIMARS missiles to the Philippines, the rotation of US Marines through the islands, and Japanese support for Manila, all make clear that the South China Sea has now been linked to other regional security challenges—at least from the US and Japanese militaries' operational perspectives," SVA said.
"The risk in 2025, then, is that a small incident in the South China Sea could escalate into a much bigger crisis, which would disrupt regional shipping, and could even test the US alliance with Manila," it added.
While SVA noted that the majority of Asian countries "wish to avoid being drawn into a Cold War-style contest" between the US and China, "pressures to pick sides are intensifying, and two (admittedly loose and porous) blocs are emerging, with the US and its allies such as South Korea, Japan, Taiwan and the Philippines on one side, and China, North Korea and Russia on the other."
As such, SVA expects that doing business in the region in 2025 would mostly "depend on dealings between the US and China."
"Competition between the US and China has become institutionalized, and is accelerating. An ideological approach is taking hold on both sides, stoked by fear, rather than cold-eyed analysis... This situation means that separating economic and security issues has become extremely hard for companies—as during the Cold War. With regard to high-technology industries, it is perhaps impossible," SVA said.
On the domestic front, SVA flagged the upcoming Philippine midterm elections in May 2025 as an "under-the-radar" risk that businesses should be mindful of.
"An ill-tempered contest between President [Ferdinand] Marcos [Jr.] and his Vice President Sara Duterte, daughter of former president Rodrigo Duterte, means that much is at stake, and political stability is far from guaranteed," according to SVA.
For MUFG Bank Ltd., the forthcoming polls "could increase some risks on political conflict between the Marcos and Duterte camps and as such stall reform momentum," the Japanese financial giant said in a December 2024 report.
However, MUFG sees the upcoming election as a "less likely" key risk; instead, it expects a "more likely" risk coming from "meaningful immigration cutbacks in the US, leading to sharp slowdown in remittances growth impacting the Philippines, India and Vietnam."
The Trump 2.0 administration plans to mass deport undocumented US migrants, which include up to 300,000 Filipinos.
"Where the Philippines could be more negatively impacted is through Trump's immigration policies especially on illegal immigrants. Remittances from the US to the Philippines makes up three percent of its GDP [gross domestic product], but our assessment here is that the vast majority of immigrants from the Philippines to the US are permanent residents, and hence the direct impact to remittances should be manageable," MUFG senior currency analyst Michael Wan explained.
While the top global risks for 2025 include Trump's return to the White House, the US Federal Reserve's easing cycle as well as the US dollar's strength, MUFG said that "we think the Philippines is relatively more insulated."
"The Philippines should be more insulated from tariffs as it is a more domestic-oriented economy to begin with, and also because it is less leveraged to a global and China growth slowdown," MUFG noted.
"The Philippines is highly unlikely to be singled out by Trump for its trade practices relative to the likes of Vietnam. A broad 10- to 20-percent import tariff is of course a risk, but this would not be a Philippines-specific factor," it added.
Overall, MUFG sees that "potential slower growth of semiconductor demand, slower global growth and particularly tariffs in the incoming Trump administration are likely to bring headwinds for Asia growth" in 2025.
Still, MUFG said the Philippines, India and Thailand "could be an exception due to support from fiscal spending and domestic demand."
In a Dec. 30 report, Singapore-based United Overseas Bank (UOB) said that "evidence of trade diversion presents strongly in the case of Vietnam, Thailand and possibly Malaysia but limited in the case of Singapore, the Philippines and Indonesia, implying lower risks of direct tariffs for the latter economies."
Amid expectations of intensified trade tensions involving the US, the European Union (EU) and China, UOB associate economist Jester Koh cautioned that "Vietnam, Singapore and Thailand are likely most impacted by risks of an economic downturn in the US while Singapore, Malaysia and Vietnam are most vulnerable to a China slowdown; spillovers of a EU recession are likely to affect Singapore, Vietnam and to some extent Malaysia meaningfully."
On the bright side, "domestic-oriented economies such as Indonesia and the Philippines, are likely more shielded from external headwinds given domestic buffers," according to UOB.