PH in the time of Trump
US President-elect Donald Trump knew from the very start it will end this way.
For winning is something he has done all his life. He has never lost and never made a mistake. It was so easy. Remember? He alone could solve the problems of America and make it great again. Amazing!
But after all these big words, what happens next?
Let’s get in the game and try to figure out how things will be and how this will affect the Pearl of the Orient.
Will we be trumped?
On the political front, so far so good. The reassuring statesman-like first address of President-elect Trump on his victory calmed many worried hearts. He called for unity and promised to be president for all Americans.
The warm greetings of President Duterte open up a potential reset of Philippine-American relations—for the better, of course.
On the economic front, many had warned that the protectionist rhetoric of candidate Trump could adversely affect us on three fronts.
First, the BPO industry that has a big US dependence. Second, our US exports which account for a substantial 15 percent of the total. And third, the US remittances, which appear to be around 35 percent of total.
No trump card
We disagree. No, we don’t think President Trump will use a trump card to win against the Philippines. Our sense is, we will be OK.
We see several reasons why the BPO is safe. One, the US is now at full employment and wages are finally rising. What this means is there are not much available American labor to man the phones. And Americans are not necessarily dying to get hold of those phones that pay little money by US standards. They have better paying alternatives. Two, the BPO jobs will likely be in the lower end of priority. Candidate Trump was talking more about getting back the manufacturing jobs it lost to countries like China, Mexico, and Brazil. With the US poised for faster growth from the prospects of massive infrastructure spending, which will increase demand for workers, we see that the American customers will need the Filipinos’ soothing American accented English and immense patience required for BPO jobs. In fact, the prospects of US growth will mean bigger business for US companies which may translate to more demand for the awesome Filipino BPO workers, especially if they really crack hard on Latinos as announced. The US problem may even be shortage of workers for farming and other jobs Americans don’t really crave for.
On the exports front, our biggest exports are electronics, many of which are assembly work where the high value components are from the US or its preferred suppliers that are probably American owned, too. We also don’t think US workers would want such jobs. It has been with us for a long time and not part of the jobs referred to as having been taken away from American hands. Candidate Trump was addressing the American rustbelt industries like cars, steel, coal, shale gas and the like, which by the strength of US unions, pay decent living wages. No point to charge punitive tariff on our exports.
Now on remittance. How many Filipino TNTs (‘Tago ng Tago’) are in the US and how much remittance do they send back home? Not really much. Filipinos are not known for massive illegal immigration in the US. The distance of the deep oceans and eagle eyed American visa processors see to that. Most remittances that are really coming from the US are from legal Filipino immigrants. That is safe. The US, which benefits hugely from the US dollar being a reserve currency, is not about to do capital controls and prevent people from remitting US dollars. That will be suicidal. Also, a substantial part of US remittances is not really from the US. They are pass-throughs. Since the US dollar is the most accepted foreign currency in the country, Filipinos earning in other foreign currencies exchange their non-US currency for US dollars. When you remit US dollars, you have to pass through New York banks and get tagged as a US remittance. In the same way, when you send over Japanese Yen, you pass through Tokyo. Pound, in London, and Euro, through any of the European capitals. Just the way the system is. Remittances from the US will continue.
Not talking much yet
On the other big issues, candidate Trump’s proposals for huge tax cuts, infrastructure spending, and a walk back from regulation will affect us. If pursued equal to the rhetoric, budget deficit amid high short term growth in the US will fuel inflation and push US interest rates much higher, strengthening the US dollar. This would mean higher cost of imports for us and push domestic prices. Call it imported inflation. This will eventually push the rest of the world to raise interest rates. This will not be good for us as high interest rates slow growth.
But for now, these are extrapolations of what could happen as there is scant specifics on the policy proposals.
The rest of the world is waiting to see if candidate Trump is the same as President Trump. We can only hope the latter is a much better version of the former. (Tony Moncupa Jr. is the President and CEO of EastWest Bank)
