For almost everyone in Asia, President Trump's latest severe tariffs are a disaster. Everyone except Liu Gang, who sees this moment as an opportunity to double the Philippine electronics factory.
“I tell businesses, 'Come to the Philippines,'” Li competed to listen to some of the machines, weighing 400 tons each, pushing out the metal parts of the Fujitsu ATM downstairs on the factory floor.
Trump's strictest tariffs came into effect on Wednesday in Vietnam, Cambodia, Thailand and Indonesia, part of rising products made in China and manufacturing rivals in Southeast Asia. Taxation transforms these factory economies. Once the most sought-after place in the world, transforming into the last place on earth you want to be a company to create cars, bags, shoes and gadgets that Americans buy.
Then there is the Philippines.
Southeast Asian countries have also suffered tariffs, but economic reliance on services and agriculture has led them to less exposure to mutual tariffs from the Trump administration, which aims to punish the manufacturing economy and return factory employment to the United States. Products coming from the Philippines are taxed at 17%, which is still high, but less than half of products from Thailand are customs duties, almost less than a third of Vietnam's collection.
The Philippines may be the only government in the world to call Trump's tariffs “good news.” Hours after Trump announced last week, a spokesman for the Philippine government said the impact of tariffs would be “very minimal,” adding that “we may attract investors from countries with high tariffs.”
Suddenly, the Philippines is appearing on radar to scramble to find factory replacements in places like Vietnam and Thailand.
At least half a dozen businesses with clients in the US have inquired in the past few weeks with Li's factory and his neighbors in one area of ​​Batangas province, 90 minutes south of Manila. Some have been committed to changing production. This is an unexpected event for a country that has long lacked manufacturing capacity that has separated many other Asian countries from poverty.
Shifts may be temporary. Countries like Vietnam are competing to attack deals with Washington and reverse tariffs that are devastating for their economy. And the Philippines faces many challenges, making it a more difficult place to move the factory quickly. Raw materials such as rubber and steel are more difficult and more expensive to procure than countries like China. Construction takes time. However, the Philippines has a large, costly, young workforce.
Li began moving most of the factory's production from Dongguan in southern China to Batangas in 2018, when Trump began a trade dispute with China during his first term.
American and Japanese companies, whose favorite parts are provided by Japanese electronics companies Epson and Emerson, a St. Louis-based industrial equipment manufacturer, have begun to set off with factories in China. It was difficult at first. There were not many options for labor. Raw materials like aluminum were three times more expensive than China. The workers he hired were not as productive as China.
Still, everyone was optimistic. “The Philippines is like China 15 years ago,” said Kevin Lee, sales director at HYS. Enterprise owns a Batangas factory. Cheaper labor was helpful. It costs about $820 a month to hire someone in China. In the Philippines, the same workers cost $274, Lee said.
HYS began shipping two container phases of raw materials from China each week, packed with plastic pellets, aluminum sheet rolls, bolts and nuts. Li worked with local staff to bring in Chinese engineers to begin automating several manufacturing processes. The business was featured, and four years later in 2022, they purchased 20,000 square meters at their third factory. This soon began die casting and began painting products such as Toyota Car door panels.
The decision to move production from China from China to the Philippines this week paid off this week as the Trump administration raised tariffs on Chinese goods to more than 100%.
Currently, Li is pitching the factory as an alternative to the “one-stop shop” of factories in neighboring countries.
“You can't put all the eggs in one basket,” he designed a new tool for metal stamping and wire cutting machines for future new clients on a recent visit to the factory as the engineers are standing nearby.
At the newly constructed factory next door, an injection molding machine inhaled plastic pellets and expelled a printer tray. Several rows, three giant laser cutting devices are engraved, cutting sheets of metal used in Emerson's power supply case. On the other side of the factory floor, workers were leaving the welding station for lunch. A box of metal parts revealed dozens of metal parts used to hold the wires of his morning pieces, Honda bikes.
A few blocks away, at the Feng Shan printing factory, four companies with plants in Vietnam, Taiwan and China visited recently to talk about contracting with the factory to make boxing materials for products that will begin production in the Philippines.
“We already have four new customers,” said Alan Tu, assistant general manager of Fong Shann's Factory in the Philippines. “After the tariff issues, they're looking elsewhere.”
Recently, three design and quality control employees have printed and read each line, the instruction manual for the scientific computer sold by Texas Instruments.
Around the corner, past towers of cardboard packaging, large industrial printers were driving out food marketing, boxes of electric pianos and casio calculators.
Inspired by clients from Australia to the UK, some manufacturers have leased dozens of land in the economic zone, offering tax incentives to test whether products can be made in the Philippines.
Soon in a car in another industrial park, Japanese medical device company Arkray is preparing to expand the production of products shipped to the US, including health devices such as lactic acid monitors and diabetes and urine test equipment.
“We're talking about how we can change our supply chain,” said Hideaki Anai, Arkray's chief supply chain officer. The company is responsible for most of its development in Japan, but recently it has opened factories around the world in Vietnam and Mexico.
“We can probably move 70% of the products we send to the US from other countries,” Anai said. This change, which affects about half of all products sold by Arkray, takes a month as the company's 400 or so products must be registered differently and labels must be changed.
“The Philippines was 0%, but now we charge 17%,” he said.
“Compared to Japan, which is currently 25%, Taiwan, which is 32%, is far better than 17%.”
