How will the Philippine Economy fare in the current VUCA world that is prevailing as a result of certain geo-political forces.  There is a great deal of Volatility, Uncertainty, Complexity and Ambiguity (VUCA) in the global, regional and domestic economies.  As regards the Philippine economy, the main source of volatility is the MAGA policy being implemented in a very unpredictable manner by President Donald Trump of the U.S.   He imposes tariffs on goods being imported by the U.S. whose rates can change from day to day.  He limits immigration to the U.S. and has significantly reduced the number of foreign students who can study at American universities.

          A core element of MAGA is the “America First” orientation which consists in more protectionist trade policies, more tariffs, less deference to multilateral institutions or commitments.  There is a distinct shift away from global economic integration and toward more bilateral/transactional relationships and supply chain readjustment as recently illustrated by the recent meeting in early November 2025 between Trump and President Xi Jinping of China.  In foreign policy, there is almost a one-man rule generating a great of uncertainty, less predictability for allies and trade partners, greater risk of “decoupling” or fragmentation of the global system. Going against the traditional ideology of the Republican Party in the U. S., President Trump favors stronger government intervention in all aspects of life, especially business, such as in tariffs, market restrictions, regulatory pressures and changes in diplomatic/trade relationships. In foreign policy, there is often more uncertainty, less predictability for allies/trade partners, and more risk of decoupling or fragmentation of the global economic system.

          In an article in the Financial Times by Joe Miller, it was pointed out that it is very difficult to plan  under Donald Trump 2.0:  “In the space of just 10 months, US businesses have been asked by the Trump Administration to swallow the cost of tariffs, to invest and build (especially semiconductors factories) in the country, to drastically lower the price of prescription drugs, and—in the case of suppliers to the federal government—to end environmental and diversity  programs.”

          What could be the direct impact of MAGA on the Philippine economy? There is a possibility that companies may reroute production out of China and the U.S., or the U.S may insist on “on-shoring” or alliances that favor the Philippines. In fact, there is already a commitment from the US and Japan to build the Luzon Economic Corridor (from Batangas to Bataan) to attract factories located in China (especially high-value electronics and semi-conductor components) to transfer their operations to the Philippines.  The negative impact of a general reduction of exports from Asian countries to the U.S. will have minimal negative impact on the Philippines because of its relatively low export-to-GDP ratio of 30 % compared to other Asian countries (where ratios can range from 80 to 150 %).  For example, in the most recent GDP forecasts for the ASEAN of the World Bank (October 2025), Vietnam  is shown to have a lower GDP growth than the Philippines for  the next three to five years because of the former’s much higher export-to-GDP ratio than the latter.

          In the realm of Uncertainty faced by the Philippines and the Asian region, my biggest concern is the probability that Taiwan will be invaded by the People’s Republic of China.  For whatever it is worth, a response from ChatGPT provides a best-guess estimate for the invasion within the next 12 months to be around 5 to 10%.  If we extend the horizon to next 3 to 5 years, the probability could rise to something like 10 % to 25 %, assuming no major triggering event (like declaration of independence, major foreign military build-up on Taiwan, or significant shift in US/China posture).     

          We may cite here certain events that occurred in late October and early November of 2025. Xi Jinping described corruption as the “biggest threat” facing the Party.  The watchdog agency Central Commission for Discipline Inspection (CCDI) reported a record number of senior officials under investigation (e.g. 58 vice-minister-level or higher) in 2024.  The military arm of the CCP (the People’s Liberation Army) has had high-rank purges, which suggests internal vulnerabilities in the most sensitive power base.  To cite as an example, No. 2 general (He Weidong) and eight other officers were expelled.   It was observed by analysts that the purges were not just of obvious rivals, but even of figures previously considered allied or trusted, indicating deeper fragility or paranoia.  The scale and frequency of purges and investigations suggest  the leadership perceives higher risk from within the system (not just external threats). 

          It has been observed by some political analysts that a leader who spends more time stabilizing internal loyalty may have less flexibility for bold external moves, such as taking over Taiwan or other foreign military adventures in neighboring countries like the Philippines.  From the standpoint of business and economics  , internal instability or lack of effective control  can increase  policy uncertainty in China, affecting global supply chains and investor sentiment. If Xi’s  control weakens (or if he becomes more inward-looking to shore up his base),  China’s foreign policy might become more cautious or conversely, more aggressive to divert attention. The second possibility is what could lead to a higher probability that China may attempt to take over Taiwan by force.  This probability leads to the uncertainty facing the entire Indo-Pacific region.

          There has been a long-standing commitment of the U.S. to defend Taiwan against any military aggression of China.  This seemed to have been bolstered by the remark of President Trump after his recent meeting with President Xi in early November 2025.  When he was asked why he did not bring up the issue of Taiwan with Xi, he cryptically answered that Xi already knows what would happen if China dares to invade Taiwan, suggesting that the long-standing commitment would be honored.  Considering, however, that Trump easily changes his mind, it is possible that when push comes to shove, the U.S. may renege on its commitment.

          In an Opinion article of columnist Gideon Rachman in Financial Times, entitled “Trump, Xi and the Danger for Taiwan,” the possibility that the U.S. may not honor its commitment to Taiwan is brought up. Let me quote Mr. Rachman, “As president, Joe Biden said on four separate occasions that the US would fight to defend Taiwan.  Trump has said no such thing.  Instead, he has hit Taiwan with 20 percent  tariffs and tried to force the country’s crucial semiconductor company TSMC to move its operations to the US…Meanwhile, China’s military build-up and pressure on Taiwan continues apace.  At the same time, reports are swirling that the Pentagon is about to announce a major reorientation of US defense policy—concentrating on the western hemisphere at the expense of East Asia.”

          If Xi, to reverse his weakening leadership position in China, decides to invade Taiwan, there are two alternative scenarios.  The first is that the U.S. defends Taiwan, a  worst case scenario that can lead to a Third World War.  It is pointless to make plans for the Philippine economy under this scenario.  As a believer in the power of prayer, I can only urge all interested parties to pray that this does not happen.  On the other hand, if there is a successful take-over and Taiwan follows the footsteps of Hong Kong and Macau as an integral part of the Chinese economy, the Philippine leadership—both in the government and in the business sector—should vigorously contribute to the strengthening of the economic union of the ASEAN community with a combined population of 620 million (including Timor Este having observer status). Having a free trade union within the Indo-Pacific region is the only way these eleven countries can counteract the economic clout of the two biggest economies in the region, India and China.  I am glad to observe that more Philippine conglomerates are investing in other ASEAN countries.  Also to be celebrated is the recent announcement that a Thai agribusiness enterprise is investing $ 1 billion in a poultry project in the Philippines.  To be continued.