The Philippines will end up as a “biggest loser” if US President Donald Trump continues a push to deliver on protectionist campaign promises, a London-based consultancy said in a new rerport.
Capital Economics noted that recent developments, from the resignation of White House chief economic advisor Gary Cohn — a free trade advocate — to the introduction of tariffs on products ranging from solar panels to steel, were fueling fears of a global trade war.
“The bigger concern is that recent events represent a turning point in US policy that lead to a much broader and deeper shift towards protectionism,” Capital Economics added.
It is no surprise that China is in US President Donald Trump’s sights and will likely be the main target of any trade war, the consultancy pointed out, given his focus on bilateral trade deficits.
Not only does China have a much bigger bilateral surplus with the US than any other country, but that surplus has actually increased sharply during Trump’s first year in office and now stands at a record level.
But other countries in the region, notably the Philippines, Vietnam, Taiwan and Korea, also look vulnerable to a shift toward protectionism.
“The Philippines would be the biggest loser if Trump followed through on his previous threats to punish American companies that outsource jobs abroad,” it said.
The country’s thriving business process outsourcing sector (BPO) is a main driver of the economy, last year contributing revenues equivalent to about 10 percent of gross domestic product.
“What happens next is highly uncertain. But given recent events, there is a clear risk that the US moves in a much more protectionist direction over the coming months,” Capital Economics said,
“If this happened, we think the Philippines, Vietnam, Taiwan and Korea would be the most vulnerable countries,” it added.
The National Economic and Development Authority, which warned back in 2016 that BPO firms needed to diversify in the wake of threats aired by Trump, earlier this year tagged BPO’s as having contributed to a fourth quarter slowdown in services exports.
“We must note that a major contributing factor to this decline was miscellaneous services, which includes the BPO industry…,” Socioeconomic Planning Secretary Ernesto Pernia said in January.
“We can take this as an indication that the current market profile of the BPO sector is ripe to move into higher value added services,” he added.