Trump 2.0 fears downplayed

Tariff threats from the incoming second administration of US president-elect Donald Trump may not be as detrimental to the Asian and ASEAN regions as initially feared, according to Albert Paul, chief economist of the Asian Development Bank during a discussion held Monday as part of the ASEAN+3 Economic Cooperation and Financial Stability Forum (AMRO Forum) in Korea, in collaboration with the International Monetary Fund (IMF) and the Bank of Korea (BOK).

According to Paul, during Trump 1.0, China exports were actually quite resilient, and even countries like Vietnam were able to provide import substitution. Thus, for Trump 2.0, the ADB economist believes, China’s exposure to the US is much less, which will allow it to weather the tariff threats much better this time around.

Additionally, Paul noted, other neighboring countries might have opportunities to replace Chinese exports. He further pointed out that even with the tariff threat, it would still take some time for the new tariffs to take effect and these may only be felt in 2026.

There are fears that with Trump’s renewed tariff threats to China, its trade partners in the ASEAN may suffer as well, including the Philippines.

However, according to Bangko Sentral ng Pilipinas Deputy Governor Francisco Dakila Jr., who was part of the discussion, the Philippines is not as export sensitive and is actually more reliant on the services sector.

The Philippine’s business process outsourcing (BPO) sector has been contributing more to the country, with the BPO industry projected to earn $37.87 billion this year, which is a seven percent increase from 2023.

On the other hand, Philippine exports have been steadily declining. In October, the Philippines’ total export sales were $6.16 billion, a 5.5 percent decrease from the same month in 2023. However, the year-to-date total export value from January to October this year was $61.83 billion, a mere 0.4 percent increase from the same period in 2023.

The Philippines has been trying to attract foreign investors to locate their production to the country but high wages, high power cost, poor infrastructure causing massive traffic have been deterrents to attracting foreign investors who instead turn to Vietnam and other ASEAN neighbors.

The AMRO Forum centered on the theme “Sustainable Growth: Reinforcing Resilience, Revitalizing Productivity.” It is the third edition of the AMRO Forum which gathered policymakers, academics and experts from multilateral institutions to discuss evolving economic challenges affecting the ASEAN+3 region and to explore potential solutions.

AMRO director Kouqing Li jointly opened the forum with Korea deputy prime minister and minister of economy and finance Sang-mok Choi, ADBank president Masatsugu Asakawa and IMF Asia and Pacific department director Krishna Srinivasan.

In his opening remarks, Li emphasized the region’s global significance, stating, “Nearly five years after the onset of COVID-19 pandemic and multiple shocks, the ASEAN+3 region has demonstrated remarkable resilience. While ASEAN+3 is expected to remain the world’s fastest-growing region, our longer-term prospects face formidable challenges, including aging populations, climate change risks, heightened geopolitical tensions, and growing geo-economic fragmentation.”

He underlined three priorities for the region to adapt to the long-term challenges. “First, we must prepare by rebuilding policy space and enhancing policy flexibility to respond to shocks. Second, it is crucial to revitalize long-term growth by embracing technological advances and adopting innovative strategies. Finally, we must intensify regional cooperation to navigate the complexities of an increasingly fragmented world.”

Recognizing the gradual improvement in global economic growth alongside rising concerns about downside risks, such as the changing global trade landscape, Korea’s deputy prime minister Choi expressed his hope that the AMRO Forum would serve as a valuable platform to discuss the future policy direction of ASEAN+3 members.

He highlighted three key points, “First, given closer ties between countries, stronger financial and economic cooperation is crucial to contain short-term risks. Second, the fundamental solution to mid- to long-term risks, lies in boosting growth potential through economic structural reform. Lastly, sustainable growth requires efforts to establish inclusive laws and institutions.”

Mr. Srinivasan of the IMF emphasized two key policy areas in his opening remarks to rebuild Asia’s resilience further and provide impetus for stronger medium-term growth.

“First, macroeconomic policies should be geared to maintain resilience. This would require rebuilding fiscal space and buffers to be able to respond to new eventual shocks. Monetary policy would need to be agile, easing where slack remains, while remaining cautious of potential headwinds from higher-for-longer rates in advanced economies. Second, the region must address looming structural challenges to maintain its growth momentum. In particular, shifting production and exports toward high productivity modern services can provide durable growth dividends,” he said.

Held alongside the ASEAN+3 Finance and Central Bank Deputies’ Meeting, the forum’s keynote speakers and panelists shared valuable insights and presented initiatives aimed at fostering sustainable economic growth in the ASEAN+3 region over the medium and long term.

During the morning session, participants gained insights from keynote addresses by Indonesia Finance Minister Sri Mulyani Indrawati and Mr. Srinivasan that set the tone for an engaging panel discussion on the region’s near-term macroeconomic outlook and policy priorities to safeguard macro-financial stability and support sustained growth.