US GDP down by 0.3%: What’s next?

The uncertainty brought about by Trump’s tariff is now bringing in results. Sadly, it isn’t good. The US economy shrank in the first quarter. The first time since the Covid 19-induced contraction. Notably, this is the result despite the 90-day pause of most of his reciprocal tariffs. As the 90-day pause ends, expect dire consequences.

According to the USA’ Commerce Department’s initial measurement released this week, its economy contracted by “0.3% in the first quarter of 2025, the first negative reading since 2022.” Reportedly, “the decline was fueled by a massive surge in imports (to avoid paying more for the tariff), while other parts of the U.S. economy showed signs of slowing.” Consumer sentiment isn’t good too as spending climbed just 1.8%, “the weakest pace since mid-2023,” it added.

Economists, before Trump declared his much ballyhooed “Liberation Day,” were expecting the “GDP to have grown 0.4% for the first three months of 2025, compared with an increase of 2.4% in the fourth quarter of 2024.” Making the situation worse is the fact that employment is cooling down. Earlier this week payroll processor ADP (Automatic Data Processing) reported that only 62,000 new roles were added in April. These are both below estimates. As reciprocal tariffs will be in full play, expect joblessness to prevail as some companies might foldup or will be trimming down.

In us, we will be in the receiving end of it.  For one, out of the US$34.61 billion total remittances of our Overseas Filipino Workers (OFWs) from January to November 2024, 40.9% came from the USA. If some of our countrymen shall be deported, and those who will remain will be rendered jobless, that amount will substantially decrease. Knowing fully well that their remittances are the lifeline of thousands of families, consumer spending will go down as well.  When it goes down, our economy will surely suffer a bit.

Precariously, President Trump’s “America First” slogan is quite threatening as well. For the time being, his emphasis is on products, not services. With all certainty, he said that it is either they manufacture the products in the USA or face tariffs. He is not holding his punches, it seems, despite the fact that these tariffs will make these commodities expensive to the Americans. Anxiously, the USA happens to be our largest export market too.

We have yet to hear though an official pronouncement about his plans on USA’s outsourced services. Generating around US$38 billion in 2024, this one will really hit us. Again, lest we might forget, one of Trump’s favorite slogans is “America first.” To some extent, it could mean “insourcing” (as opposed to outsourcing) or bringing jobs back to the USA.   

Last year’s report of the reputable Nomura Global Markets Research confirmed this. It said that the “Philippines is considered the most vulnerable among ASEAN nations due to the country’s close ties with the US and its reliance on the American market.” Why? As Trump is expected to revive the same thing he did in his first term. 

That insourcing or bringing back jobs to America will affect BPO revenues is a fact.  According to Nomura, such was the case during Trump’s first term as “services exports growth to the US halved to 5.1 percent from 2017 to 2019 compared to prior years.” 

Obviously, therefore, if President Trump make true his threat of bringing back outsourced jobs to the USA (as he did during his first term), this industry will certainly suffer. Considering the significance of its contribution, logically, the country’s economy will be badly hit. 

Notably though, the optimism from the outsourcing industry remains high. According to Information Technology and Business Process Association of the Philippines President Jack Madrid, “fueled by demand from banking and health services, the country’s information technology – business process management (IT-BPM) industry is seen booking revenues amounting to US$40 billion this year. He is so optimistic that under its roadmap, “the IT-BPM industry’s aggressive target is to generate US$59 billion in revenues and employ 2.5 million by 2028.”

Undeniably, the US remains the industry’s biggest customer. This is huge and is achievable if we can impress upon Trump our relevance as an ally. Can we?

Absolutely, it is a fact that China is a big threat to the USA militarily and economically.  Strategically situated to counter China’s military might, is there a possibility that we shall stay relevant before President Trump’s eyes? Well, maybe. If so, then, we can take a sigh of relief.