Amid deteriorating relations with China, the Philippines, under the current Trump 2.0 administration, may increasingly become a "friendshoring" partner for the US, its former colonizer, especially in the technology sector, according to researchers at the think tank Center for Strategic and International Studies (CSIS).
"Due to shifting geopolitical dynamics with the People's Republic of China, the Philippines is exploring new energy, tourism, and infrastructure projects, presenting a potential opportunity to strengthen friendshoring initiatives with the United States," noted William Alan Reinsch, Scholl Chair in International Business at the Washington-based CSIS, and Scholl Chair intern Reena Samuel in a Jan. 31 blog.
The Switzerland-based World Economic Forum (WEF) defines friendshoring as "rerouting of supply chains to countries perceived as politically and economically safe or low-risk, to avoid disruption to the flow of business.
In 2023, WEF noted that friendshoring has been "a growing trade practice where supply chain networks are focused on countries regarded as political and economic allies."
Reinsch and Samuel's blog, titled "Rocking the Boat: The Philippines Trade Strategy Amid Rising Geoeconomic Tensions" said the Philippines has "also taken strategic steps to strengthen its economic pathways with other nations, signifying a slowdown in their relationship with China”—its biggest trading partner.
For instance, the CSIS blog recalled that when Chinese vessels rammed a Philippine Coast Guard (PCG) ship and supply boat at the disputed Second Thomas Shoal -- known locally as Ayungin Shoal—back in 2023, Transportation Secretary Jaime J. Bautista subsequently announced that the Philippines had stopped securing funding from China for three big-ticket infrastructure projects under the Marcos Jr. administration's Build Better More program.
"Bautista [had] emphasized that the collision did not influence his decision—rather, China's delays prompted the Philippines to call on Japan, South Korea, the United States, and the European Union for 'better' deals" in infrastructure, unlike the Chinese loan commitments secured during the previous Duterte administration, the blog noted.
In a Jan. 31 interview, US President Donald J. Trump's Secretary of State Marco Rubio said: "You see it in the Indo-Pacific where every day—it's not just Taiwan; it's the Philippines—are being aggressively challenged by the Chinese militarily."
For CSIS, "in assessing how to best engage Southeast Asia economically, the Trump administration will need to consider how the regional powers' economic and security standing has evolved vis-à-vis the United States and China."
In the case of the Philippines, CSIS pointed to the last four years—thanks to closer ties between Philippine President Ferdinand R. Marcos Jr. and Trump's predecessor Joe Biden—wherein Manila "continues to be a key piece of a successful approach for Washington."
As such, CSIS urged leveraging the stronger economic as well as military relations between the Philippines and the US since last year, amid China's more aggressive stance in South China Sea's disputed territories.
According to the CSIS blog, the Philippines and the US can potentially become friendshoring partners in high-tech.
"The Philippines enjoys a comparative advantage in the technology sector. The Philippine semiconductor market, which has benefited greatly from the global uptick in semiconductor demand, is transitioning into more specialized areas, such as integrated circuit design and fabrication. Its semiconductor industry is expected to grow 10 to 15 percent annually until at least 2027," the blog pointed out.
"Under the Chips and Science Act's International Technology, Security, and Innovation Fund, the United States designated the Philippines as a partner-country to incentivize the Philippine semiconductor industry to become more conducive for US investors by funding initiatives such as training 128,000 semiconductor engineers and technicians by 2028. The Philippines has been increasing its high-technology exports since the early 2010s, with the top products being integrated circuits, office machine parts, gold, semiconductor devices, and insulated wire," it added.
It helps that the Philippines economy is expected to be among Southeast Asia's top performers, estimated by the Washington-based multilateral lender International Monetary Fund (IMF) to expand by 6.1 percent this year, the blog noted.
Real gross domestic product (GDP) grew by a below-target 5.6 percent in 2024, no thanks to the damage wrought by a string of strong typhoons towards the end of last year, although it was still among the fastest expansions in the region.
However, CSIS pointed to lingering energy and infrastructure gaps that must be addressed to maximize the Philippines' potential as a US friendshoring ally.
"To build international credibility as an attractive trading partner, the Philippines needs to develop reliable energy sources and invest in infrastructure to facilitate growth in sectors that require 24/7 connectivity," it explained.
In particular, CSIS is optimistic about recent moves by the Marcos Jr. government to revive the mothballed Bataan Nuclear Power Plant as part of its plan to incorporate nuclear energy in the country's power grid by 2032, with the help of the US, Japanese, and South Korean governments.
"The steps the Philippines has taken to elevate its economic standing through partnerships with other countries will likely make the country more attractive to foreign direct investment and may lessen its trade dependence on China," according to the CSIS blog.