Navigating Political and Trade Risks in the Philippines: Strategic Opportunities Amid Marcos' Second-Half Agenda

The Philippines stands at a crossroads in 2025, balancing the dual pressures of U.S. tariff negotiations, lingering Duterte-era political tensions, and the ambitious infrastructure agenda of President Ferdinand Marcos Jr. For investors, this complex landscape offers both risks and rewards. By dissecting the interplay of these factors, we can identify strategic opportunities in Philippine equities and infrastructure investments.

U.S. Tariffs: A Double-Edged Sword

The recent U.S.-Philippines tariff agreement, which reduced the U.S. tariff on Philippine exports from 20% to 19%, appears modest on paper. However, the effective tariff on key Philippine exports like semiconductors and electronics remains near 6.3%, one of the lowest in Southeast Asia. This creates a paradox: while headline tariffs have risen, the actual burden on export-sensitive sectors is cushioned by exemptions and existing trade agreements.

Yet, the threat of higher tariffs looms. If the U.S. follows through on its broader Indo-Pacific strategy, sectors like food products, leather goods, and textiles—less protected by exemptions—could face disproportionate harm. For example, the Philippine Exporters Confederation (Philexport) warns that these industries may need aggressive government support to remain competitive.

Investment Insight: The CREATE MORE Act, which fast-tracks tax incentives for infrastructure and tech investments, could mitigate some of these risks. Investors should monitor the implementation of this law and its impact on sectors like logistics and clean energy. A would provide clarity on market sentiment.

Political Fractures and Legislative Gridlock

The 2025 midterm elections have deepened the divide between President Marcos' centrist coalition and Vice President Sara Duterte's populist bloc. This split threatens to stall critical infrastructure projects and economic reforms. For instance, only three of 16 major infrastructure promises from the past three State of the Nation Addresses (SONAs) have been completed, while three remain stalled.

The political tug-of-war extends to budget allocations. Marcos' coalition prioritizes infrastructure-driven growth, while Duterte's faction favors stricter oversight of foreign investors and inward-looking policies. This tension could delay projects like the Luzon Economic Corridor, a $178 billion initiative involving U.S. and Japanese partners.

Investment Insight: Infrastructure projects in Mindanao and the Bicol region—areas where Duterte's influence is strongest—may receive preferential treatment, creating localized opportunities. However, nationwide projects face higher uncertainty. A could highlight sector-specific risks and rewards.

Infrastructure: The Long Game

The Marcos administration's $178 billion infrastructure pipeline remains a cornerstone of economic growth. Yet, progress is uneven. The Metro Manila Subway, for example, is only 69.86% complete, while the North-South Commuter Railway (NSCR) faces delays due to land disputes and rushed approvals. These bottlenecks underscore the need for private-sector involvement, particularly through public-private partnerships (PPPs).

The U.S. tariff negotiations also indirectly benefit infrastructure. A 19% tariff on Philippine exports could divert trade flows to high-value sectors like semiconductors, which are less affected by the tariff. This could boost demand for logistics infrastructure, such as ports and warehouses, to handle increased trade with the EU and UAE.

Investment Insight: Real estate investment trusts (REITs) focused on logistics and industrial properties may outperform in 2025. Additionally, the P250 billion Pag-IBIG Fund credit line for housing projects signals a shift toward social infrastructure. A would help gauge relative valuations.

Strategic Opportunities and Risks

1. Equities: Tech and logistics stocks are well-positioned to capitalize on trade diversion effects. However, sectors like agriculture and manufacturing face headwinds due to U.S. tariffs and political instability.
2. Infrastructure: Projects in Mindanao and Bicol may see faster approvals under Duterte's influence, but nationwide initiatives remain at risk. Investors should prioritize firms with strong government ties or PPP expertise.
3. Currency and Debt: The Philippine peso's volatility, driven by U.S. tariff threats and global economic uncertainty, makes dollar-denominated bonds from blue-chip firms a safer bet.

Conclusion: A Calculated Bet

The Philippines' investment story in 2025 is one of cautious optimism. While political and trade risks are significant, the country's strategic location, young population, and growing middle class offer long-term upside. Investors who can navigate short-term volatility—by focusing on sectors insulated from U.S. tariffs and leveraging political dynamics—may uncover compelling opportunities.

As the Marcos administration enters the second half of its term, the key will be to balance ambition with pragmatism. For those willing to look beyond the noise, the Philippines' market remains a land of contrasts—and potential.