THE IMPACT of global trade uncertainties amid sweeping retaliatory tariffs on the Philippines will likely be minimal enough that it is not cause for concern, UBS Investment Bank said.
“We maintain our view that the Philippines’ direct and indirect exposure to trade and global gross domestic product (GDP) growth remains negligible,” UBS Senior ASEAN (Association of Southeast Asian Nations) and Asia Economist Grace Lim and analyst RJ Aguirre said in a commentary.
“This market may be considered a relative safe haven in the face of the ongoing trade war and global recessionary risks,” they added.
Countries have been scrambling to forge agreements, negotiate lower tariffs or even retaliate against the United States after President Donald J. Trump slapped a minimum 10% tariff on the majority of its trading partners.
However, Mr. Trump suspended the higher reciprocal tariffs for 90 days starting April 9.
The Philippines’ 17% reciprocal tariff is the second lowest in Southeast Asia, just after Singapore’s baseline 10% rate.
The UBS economists project a “significant growth downside” of around 50 basis points (bps) to 100 bps globally and a 30-bp to 120-bp drag on the region from the tariffs.
They noted the impact to the Philippines will be among the lowest in the region (30 bps), “as the risks appear to be comparatively smaller given the domestic-oriented nature of the economy.”
The UBS economists said the Philippines is among the least exposed to the US in terms of goods exports in the region, accounting for about 2% of GDP.
“The country’s total trade-to-GDP ratio is at (around) 66%, which shows that the country is still exposed if a broader global slowdown were to take place.”
On the other hand, the Philippine economy will likely be supported by expectations of further rate cuts and easing inflation this year, the UBS economists said.
“Our expectation of three more rate cuts this year and low inflation (2.4%) could be a boon to this market,” they said.
UBS projects the Bangko Sentral ng Pilipinas (BSP) to cut rates again at the Monetary Board’s policy meetings in August, October and December, in step with the US Fed.
The central bank resumed its rate-cutting cycle earlier this month, delivering a 25-bp cut to bring the key rate to 5.5%.
The BSP also this month slashed its risk-adjusted inflation forecasts to 2.3% in 2025 from 3.5% previously and to 3.3% in 2026 from 3.7%.
SUPPLY CHAINSIn a separate commentary, Moody’s Senior Director Choon Hong Chua flagged the impact of the anticipated supply chain disruption on the Asia-Pacific.
“Exporters in the Asia-Pacific region will bear the brunt of the recent developments as they now face increased costs and uncertainty in bringing their products to the US market,” he said.
“Exporters could face a decline in US demand, loss of competitive edge and shrinking market share should they increase consumer costs to cushion the impact of tariffs.”
The tariffs will put “immense” pressure on revenues, Mr. Chua said, pointing out that these will be even more damaging for “those who are unable to pivot swiftly to new markets.”
“A diminished access to the US market for companies that also serve Asia and Europe could have a domino effect on supply-chain disruptions that could destabilize businesses,” he added.
Mr. Chua advised exporters to study and analyze their supply chain and third-party businesses.
This would “enhance risk resilience that can be the difference between being caught off guard by a supply chain breakdown and being able to manage potential disruptions proactively.”
“Supply-chain visibility and agility are crucial for resilience amid tariffs and other shocks. Businesses that adapt quickly to changing trade landscapes and mitigate risks will better navigate uncertain times.” — Luisa Maria Jacinta C. Jocson
