5 days Ago By N/A (Ben Arnold de Vera)
Net importing countries like the Philippines should brace for a barrage of Chinese goods as China seeks alternative markets to the United States (US) amid intensifying trade tensions between the two economic giants, according to the think tank Capital Economics. In an April 15 report, Capital Economics chief global economist Jennifer McKeown pointed out that even prior to US President Donald Trump's tariff spree, emerging Asian economies, including the Philippines, "have seen the largest deterioration in their trade position relative to China in the past five years." "Thailand, the Philippines, and Vietnam have all seen their deficits with China rise significantly over the past five years, as have Mexico and Turkey.
This relates partly to re-routing of China's exports via some of these markets, but not entirely," McKeown noted. The latest Philippine Statistics Authority (PSA) data showed that from January to February 2025, the value of products imported from China soared by 19.4 percent to $5.
77 billion, from $4.84 billion in the first two months of 2024. In the month of February alone—when Trump was already threatening tariffs on US trading partners with whom it has huge trade surpluses—Philippine imports from China jumped 12.
6 percent to $2.46 billion, from $2.18 billion a year ago.
The share of Chinese exports to the Philippines' total imports has also been steadily rising—to 27.6 percent as of end-February 2025, from 24.3 percent in the previous year.
Imports from China in February this year accounted for 26.1 percent of the month's total, up from a year ago's 22.8-percent share.
Only China enjoys a double-digit share of Philippine imports among all trading partners. Based on the PSA's final international merchandise trade statistics for 2024, China was the Philippines' biggest supplier of imported goods, which amounted to $32.83 billion—or 25.
7 percent of the country's total imports—last year. The Philippines' top import commodities from China in 2024 included electronic products; iron and steel; mineral fuels, lubricants and related materials; miscellaneous manufactured articles; as well as industrial machinery and equipment. The Philippines is a net importer of the goods it consumes, which means it sources more products from abroad than it produces locally to meet domestic demand.
In contrast, mainland China is only the fourth-largest destination for Philippine exports, which in 2024 were valued at $9.44 billion—almost four times smaller than the Chinese goods imported by the country. Amid strained relations between Manila and Beijing over disputes in the West Philippine Sea, end-February 2025 sales of Philippine-made goods to China declined by 2.
9 percent to $1.29 billion, from $1.33 billion a year ago.
In February alone, Philippine exports to China slid by a sharper 7.7 percent to $646.59 million, from $700.
48 million during the same month last year. The share of export sales to China also dropped to 10.2 percent in the first two months of 2025, from 11.
1 percent a year ago, as the February-alone share fell to 10.3 percent from 11.6 percent in 2024.
This brought the Philippines' trade deficit with China to $1.81 billion in February this year—the biggest across trading partners— comprising more than half of the total trade-in-goods deficit of $3.16 billion that month.
In 2024, the Philippines' full-year trade deficit with China reached $23.39 billion, close to half of the $54.33-billion total gap.
Capital Economics warned that "a rise in China's exports to other countries will risk damaging those economies' industrial sectors as domestic producers struggle to compete." While Philippine manufacturers may lose to China in terms of the yawning trade deficit, Capital Economics said that the vulnerability of Chinese exports to the US—especially smartphones and other electronic devices, which, the think tank noted, have been exempted from Trump's tariffs—may provide some export opportunities to America. The US remains the Philippines' No.
1 export destination, although bilateral trade between Manila and Washington lags behind two-way trading volumes with China and Japan. "On the face of it, the competitors best positioned to benefit from China's potential loss of US market share include Mexico, Taiwan, Indonesia, the Philippines, and maybe even Germany and Italy," McKeown said. "But China's exporters remain extremely competitive.
Its export prices have dropped by 20 percent over the past two years. Accordingly, we think it's reasonable to assume that any loss of market share in the US will be offset by an increase in exports to non-US countries. As a result, US tariffs will not necessarily lead to a substantial fall in China's share of global export volumes," she added.
McKeown also cited that "working hours are notoriously very long in China, so the monthly wages probably overstate the extent of any cost advantage for other emerging markets. "What's more, China's industrial policy has been to invest heavily in various types of manufacturing and to offer significant subsidies, putting other emerging markets at a disadvantage," according to McKeown..
