Both the US and China are major export destinations and import sources for the Philippines. The country’s bilateral trade with these two economies accounts for more 25% of total exports and imports for the period 2020-19.
Its main linkages to the global production networks are through electronics and machinery exports.
However even in the context of retaliatory tariffs between US and China, the country’s exports have remained broadly stable.
Based on the PSA data, electronics exports which make up more than half of the Philippines’ goods exports continued to perform well in 2019, notwithstanding its link with global production networks. This phenomenon can be attributed to the Philippines’ low exposure to products targeted directly by US tariff actions against China. The exposure is estimated at a low of 0.5%.
Not surprisingly, the Philippines is expected to be among the least affected by the US-China trade tensions. This supports IMF’s view that the country’s low participation in global trade as well as in global value chains relative-to-peers seems to explain why the Philippines has not been negatively impacted by the US-China trade war.
In the long run, the escalation of the US-China trade war and the coronavirus pandemic, could have a positive impact on the Philippine economy. Both events have prompted a re-evaluation across countries of the existing global supply with firms possibly moving toward reducing dependence on any single country. This current wave of revamping of global supply chains opens a window of opportunity for the Philippines to benefit from trade redirection and relocation of production sites.
While the Philippines has been recognized as one of the top investment destinations post-COVID-19, the Executive, Congress, and the private sector have to unceasingly do more to further boost the country’s attractiveness to foreign investors.
