How the US tariff war can impact Philippines, state economist explains

February 11, 2025 | 1:50pm

MANILA, Philippines — As the world watches U.S. President Donald Trump implement sweeping policy changes from imposing tariffs to suspending foreign aid programs, the National Economic and Development Authority (NEDA) remains optimistic about the Philippines’ resilience.

Trump has ignored a trade war with several countries, including a most recent 25% tariff on steel and aluminum imports to the U.S. China, in response, said it would retaliate.

However, Rosemarie Edillon, undersecretary at NEDA, described the situation as a “wait-and-see game” for the Philippines, particularly when it comes to labor impact.

Edillon said any effects would likely hit the U.S. economy first before rippling across global markets.

For one thing, tariff wars could impact the exchange rate. The US tariff wars could also drive inflation in the US, Edillon said.

She added that if the U.S. Federal Reserve responds to these developments, it could trigger changes in global interest rates, which would also influence Philippine rates.

Despite these uncertainties, Edillon said NEDA does not foresee significant labor disruptions in the Philippines. On the contrary, the country could stand to gain from positioning itself as an alternative source of exports.

“We can gain a lot from our regional free trade agreements,” she said, citing potential opportunities with countries like Canada and Mexico. "maybe what they will do is to maximize the regional free trade agreements and this is where we can really benefit."

The Philippines and Canada are currently engaged in free trade negotiations as of January.

Impact of USAID freeze

Apart from the tariff war, Trump’s decision to freeze United States Agency for International Development (USAID) projects has placed 39 development initiatives in the Philippines in limbo. These include critical programs ranging from environmental conservation to education in Bangsamoro.

While acknowledging the potential impact, Edillon downplayed its severity, noting that the Philippines has reduced its reliance on U.S. aid over time.

“Before, we depended on USAID for school buildings. Now, it’s more about technical assistance, which we can source from other development partners,” she said in Filipino.

NEDA continues to work on studies initiated with USAID, incorporating input from its staff despite the freeze. The agency is also awaiting further developments from Washington regarding the suspension.