PH-US relations useful amid fears of Trump trade policies — PEZA

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The Philippines should leverage its longstanding trade and investment relationship with the United States amid growing fears of US trade protectionist policies by the incoming (Donald) Trump administration, the Philippine Economic Zone Authority (PEZA) said yesterday.

This raises the likelihood of a promising US-Philippine cooperation during Trump’s term, especially since the Southeast Asian country is strategically located in the region, PEZA said.

PEZA Director-General Tereso Panga said in a social media post the Philippines should leverage these advantages with the evolving trade strategies of the US, “and position itself as a cost-effective alternative for off-shore manufacturing and ally-shoring for American and other multinational corporations that are pivoting away from China, Vietnam or Mexico.” 

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Trump has threatened to impose higher tariffs against those countries’ imports in order to offset a ballooning US trade deficit.

Ally-shoring

Ally-shoring is a process by which countries rework critical supply chains and source essential materials, goods, and services among and between trusted democratic partners and allies, with a focus on investing in the short and long-term relationships that protect and enhance joint economic and national security, according to the US-Mexico Foundation.

Multinationals are also de-risking their supply chain by adding a second country to their existing trade partner, Panga said.

“We have the Luzon Economic Corridor, strengthened trade ties with the US and the CHIPS (Creating Helpful Incentives to Produce Semiconductors for America) Act of which the Philippines will be a beneficiary,” Panga said.

Economic Corridor

The Economic Corridor is a trilateral agreement with Japan and the US meant to boost American investments in manufacturing, particularly semiconductors. 

The CHIPS Act provides US government funding support for expansion projects of electronics and semiconductor companies outside the US.

Within the China+Asean 6 trading bloc, the Philippines has the most “negligible trade deficit” of $4 billion with the US in 2023, compared to Thailand’s $43 billion, Vietnam’s $109 billion, and China’s $300 billion, Panga said.  

“As such, the Philippines could be insusceptible to Trump’s tariff policies given our negligible trade deficit with the US, and that many of our top exporters to the US are into IT-BPM (information technology-business process management) services,” Panga said.

Trump earlier vowed to impose 60-percent tariffs on goods from China and 10 percent against the rest of the world. 

Higher import tariffs could also be imposed against other economies such as Mexico, Canada and Vietnam which hold the largest trade surpluses among America’s trade partners. 

PEZA  zones are home to 482 electronics and semiconductor companies that provide critical back-end support  to principal clients in the US.

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