PHL lags in adapting to US-China trade fallout

By Justine Irish D. Tabile, Senior Reporter

HANOI — The Philippines remains behind in adapting to the US-China trade tensions, which have redirected supply chains toward Southeast Asia, the DHL Group said.

Released last week, the DHL Global Connectedness Report 2026 indicated that US-China ties continue to diminish since 2016, as the share of US trade, capital formation, and people flows with China dropped 42%, with China’s share own 37%.

The report, which was released last week, found that while the US and China reduced their direct engagement, the two countries saw increased trade with other countries.

“As companies look to build capacity outside of China, Southeast Asia has been the most attractive location for this,” Steven A. Altman, senior research scholar and director of the DHL Initiative on Globalization at the New York University Stern School of Business, told BusinessWorld.

“Part of it is due to the inherent competitiveness of this region, its growth, and also its proximity to China, as well as its integration into what is really a broader Asian manufacturing ecosystem,” he added.

He said that within Southeast Asia, Vietnam could be leading the countries that have captured that business activity.

“The Philippines also has, but so far other countries have benefitted more thus far than the Philippines,” he said. “But if we look at the forecasts, the Philippines stands out as one of the countries that has the most potential to benefit from this dynamic.”

The DHL Group has identified 20 countries that it expects to benefit from supply chain diversification, which it has dubbed Geographic Tailwinds 20, or GT20. The Asia-Pacific countries are China, India, Indonesia, Vietnam, Bangladesh, the Philippines, Pakistan, and Australia.

“Of the eight countries that we have identified, I would say the one that has not quite lived up to what we believe for now is the Philippines,” Ken Lee, chief executive officer of DHL Express Asia-Pacific, told reporters on the sidelines of a facility tour in Vietnam.

“I believe what is going to drive the Philippines big time will be the small and medium enterprises (SMEs),” he added.

The report ranked the Philippines at 59^th in global connectedness in 2024, an improvement from 62^nd place in 2023. It was the highest ranking the country achieved in the DHL index since it ranked 57^th in 2019.

Mr. Altman said five areas that the Philippines could improve on to tap its potential are peace and security, the domestic business environment, international openness, regional integration, and public opinion.

“The first one is peace and security, without which it is really hard to develop mutually beneficial ties with other countries. We take peace and security as the foundation,” he said.

“The second one is sometimes surprising for people, it is the domestic business environment. The third is international openness. But what we found is that the attractiveness of the domestic business environment has an even bigger impact,” he added.

Meanwhile, he said that even with the tariffs being imposed by the US, Southeast Asian countries are still set to enjoy an advantage over China.

“For the US market specifically, what I would always be looking at is the relative tariff. So up until the latest developments, the pattern that we were seeing was higher tariffs for China,” he said.

“Now, how that develops in the future, we don’t know. But if that continues to be the case, even though the tariffs are much higher than they were last year, Southeast Asia still has the potential to benefit relative to China,” he added.

Into 2026, DHL Express President John Pearson said that he remains optimistic about global trade despite headwinds such as the US-Iran war and the tariff adjustments in the US.

“What I am positive about is global trade, because the GCR Report and the Global Trade Atlas give me 9 million data points that say I should be positive about global trade,” he said.

“I fully recognize that there are economic cycles of downturn and upturn, and all the positives and the negatives. I accept that. But trade is continuing to grow faster and did grow faster during the tariff year than it did in 2017. In fact, the first half of last year was faster than 2010,” he added.

He said that if the Russia-Ukraine war were to be resolved somehow and if the Middle East crisis doesn’t escalate further, businesses will be active — and will want to buy, sell, trade, repair, put salespeople on a plane and overseas salespeople to sell their wares.

“Businesses were wanting to get going. So I had a positive outlook towards this year. And, you know, the first two months of this year bore that out … Now, we’ve got a slightly unusual March because of what’s happened in the Middle East,” he said.

“But, you know, I tend to have a positive belief that business heals. Business is very self-resuscitating. And trade, if I look at the linear progression over the last 10 to 15 years, has been positive,” he added.

The Association of Southeast Asian Nations (ASEAN) +3 countries have direct exposure to the war in the Middle East, the ASEAN+3 Macroeconomic Research Office (AMRO) said in a commentary over the weekend.

“Based on AMRO’s internal estimates, if oil prices remain elevated at around $90 per barrel for the remainder of the year, inflation in the region could increase by an additional 0.7 percentage points, and growth could be reduced by 0.2 percentage points,” it said.

Despite this, AMRO said ASEAN+3 countries’ macroeconomic starting point is solid, after the region grew 4.3% in 2025 despite a shift in US trade policy and after regional inflation stood at 0.9%.

“It gives central banks and fiscal authorities greater room to absorb a supply-driven price shock without being forced into growth-damaging policy tightening,” it said.

AMRO said the region’s monetary policy should prioritize maintaining orderly market conditions rather than tightening prematurely in response to supply shock.

“At the same time, central banks will need to stay alert. Should inflationary pressures broaden beyond energy prices and become more entrenched, a policy response would be warranted,” it said.

Meanwhile, it said that the region should implement interventions that are “targeted at vulnerable segments through transparent, time-bound measures, rather than broad-based subsidies that distort price signals and erode the fiscal space that may be needed if the conflict deepens.”

“Policymakers should also watch developments beyond headline energy prices: disruptions to shipping and logistics may signal broader economic effects ahead,” it added.