MANILA, Philippines –A former Bangko Sentral ng Pilipinas (BSP) economist has weighed in on the possible impact of US President Donald Trump’s trade war with Canada, Mexico, and China on the Philippines.

Former BSP deputy governor for monetary and economics sector Diwa Guinigundo told radio station DZBB that the tariffs will first hit Filipinos in the US. There are roughly 4.2 million Filipinos in the US, and around 900,000 in Canada, according to government data.

Trump slapped a 10% levy on Canadian oil, while oil imports from Mexico will be hit with a 25% tariff. Ottawa, Mexico City and Beijing have since vowed to impose retaliatory tariffs against the US.

Guinigundo said the tariffs will not only raise gasoline prices in the US, but the cost to transport many other goods as well.

“Tataas ang presyo ng langis, tataas ang presyo ng gasolina, tataas ang mga produkto na nakadepende, nakaasa sa langis. So ‘yun ang pagkain, ang mga damit na kanilang sinusuot,” he explained.

(If oil prices rise, gas prices will climb, as well as the cost of products that depend on oil. So that’s food, the clothes that they wear.)

Higher commodity prices will trigger faster inflation rates in the US. Guinigundo warned that this will prevent Washington’s central bank, the Federal Reserve or Fed, from continuing its easing cycle on interest rates.

The former central bank deputy governor pointed out that the Fed’s possible hiking of interest rates due to inflation will affect foreign portfolio investments (FPIs) entering the Philippines since the BSP is still in its easing cycle.

“The capital, foreign portfolio investments (FPIs) could leave the Philippines and go back to America because the interest rates back home are higher,” Guinigundo said in Filipino.

FPIs — also known as hot money — are investments that can enter and leave a country’s financial markets easier than foreign direct investments. Examples of FPIs include stock market securities, as well as government bonds.

Data from the BSP show that around $283 million in FPIs left the country in January. The US accounted for 35% of the outflows that month.

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These capital outflows could further weaken the Philippine peso against the US dollar. 

BSP Governor Eli Remolona Jr. earlier said the monetary authority aims to cut interest rates by half a percent this year. But its Monetary Board decided to pause the lowering of local policy rates to further assess the impact of Trump’s economic policies on the global market.

Opportunities for the Philippines?

For Guinigundo, the US trade war also poses an opportunity for the Philippines to supply Canada, Mexico and China with goods that are now more expensive to obtain from the US.

But he questioned whether the Philippines can fill this gap for affected countries since it mostly exports components of electronics, not the devices themselves.

Data from the Philippine Statistics Authority (PSA) showed that growth in Philippine manufacturing drastically slowed from 4.9% in 2023 to just 0.9% in 2024.

The PSA also reported that the manufacturing sector lost 290,000 jobs in January, the highest that month.

With economists forecasting the Philippines to meet its economic growth targets this year, BDO’s executive vice president and institutional banking head Charles Rodriguez said other foreign companies are interested in investing in the country.

“Australian and Canadian companies are actively seeking Philippine partners, particularly in infrastructure, energy and food segments where significant opportunities abound,” he said.

Economists also echoed Finance Secretary Ralph Recto’s optimism that the implementing rules and regulations of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act will entice more investors to enter the country.

“With the signing of this IRR, we now send a clear message to the world: The Philippines means business. We are ready to compete. We are a dependable economic ally. We offer stability amid uncertainty. And yes — we are Trump 2.0-ready,” Recto said. – Rappler.com

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