Navigating Trade Challenges: The Philippines' Position Amid U.S.-China Tensions

As global trade tensions escalate, the Philippines finds itself in a precarious position between its two largest economic partners, the United States and China. In 2024, the U.S. emerged as the Philippines' leading export market, while China dominated its import sector, creating a complex trade dynamic that poses both opportunities and challenges for Manila.

President Ferdinand Marcos Jr. has been at the forefront of navigating this challenging landscape. At the 46th Association of Southeast Asian Nations (ASEAN)-Gulf Cooperation Council summit in Kuala Lumpur on May 27, 2025, Marcos Jr. emphasized the need for regional cooperation to mitigate the impacts of increasing tariffs from the U.S., a long-standing ally, while managing tensions with China over maritime disputes in the South China Sea (Samsul Said/Bloomberg, 2025).

In 2024, Philippine exports to the U.S. were valued at C$19.8 billion, significantly outweighing the C$9.3 billion in imports from the U.S., resulting in a trade surplus of C$6.8 billion. This trade relationship is heavily reliant on electronics and semiconductors, which are critical sectors amid ongoing geopolitical tensions (Philippine Statistics Authority, 2024). Conversely, imports from China reached C$45.8 billion, with exports at C$13.1 billion, indicating a substantial trade deficit with Beijing (Philippine Trade Department, 2024).

The Philippines’ economic strategy includes expanding trade agreements beyond the U.S. and China. Following the reciprocal tariffs imposed by the U.S. on April 2, 2024, Philippine officials met with U.S. Trade Representative Jamieson Greer on May 2, 2024, to discuss strengthening bilateral relations and potential trade concessions (Philippine Department of Trade and Industry, 2024). This meeting highlighted Manila's intent to negotiate beneficial terms amid rising trade tensions.

In response to the challenges posed by U.S. tariffs, the Philippines is diversifying its trade portfolio, engaging in discussions for free trade agreements with Canada and the European Union while exploring opportunities with emerging markets in Africa and Latin America. Notably, the Philippines is pursuing a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as part of its strategy to strengthen trade ties with like-minded economies (Asia Pacific Foundation of Canada, 2025).

The potential for increased trade with Canada is particularly promising. In 2023, Canada imported C$2.2 billion worth of goods from the Philippines, making it the third-largest export market within the ASEAN region. Key exports to Canada include electronics and agricultural products, with significant growth potential in the agricultural sector (Canadian Trade Statistics, 2023). Discussions for a free trade agreement with Canada began in December 2024, reflecting a strategic pivot towards diversifying trade partnerships amid increasing global economic uncertainty (Canadian Ministry of International Trade, 2024).

However, the Philippines faces significant challenges in improving its logistics infrastructure and regulatory efficiency to attract foreign direct investment. In 2023, foreign direct investment inflows rose to C$8.7 billion, yet this remains lower than regional competitors due to ongoing issues in the financial and regulatory sectors (Bangko Sentral ng Pilipinas, 2023).

Furthermore, while the Philippines benefits from lower tariffs under the U.S. reciprocal tariff scheme, reliance on the U.S. and China poses strategic risks. The Philippine government has adopted a cautious approach towards Chinese investments, emphasizing alignment with national development goals while maintaining a firm stance on territorial issues (Department of Foreign Affairs, 2024).

As Manila navigates its complex trade relationships, the Philippines’ ability to capitalize on opportunities presented by shifting global supply chains will be crucial. The ongoing dialogue and negotiations with various partners, including Canada and within the ASEAN framework, may provide pathways for sustainable economic growth and diversification away from the dual pressures of U.S. and Chinese economic influence. The Philippines stands at a critical juncture, where strategic decisions made in the coming years will shape its economic landscape and geopolitical standing in the region.