Trade spat dragged financial markets in Q1

TARIFFS imposed by United States President Donald J. Trump, along with uncertain trade and fiscal policies, drove the local financial market's movement in the first quarter of 2025, analysts said.

- By Matthew Miguel L. Castillo

These factors are expected to persist in the second quarter as well, the central bank said.

The Philippine Stock Exchange index (PSEi), the barometer for the country's stock market, closed at 6,180.72 in the first quarter, declining 10.5% from 6,903.53 a year earlier.

Meanwhile, data from the Bankers Association of the Philippines showed the peso closed at P57.21 against the dollar in the January-to-March period, weakening by 1.7% from P56.24 a year earlier.

At the secondary bond market, domestic yields fell by an average of 3.59 basis points (bps) annually based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates posted on the Philippine Dealing System's website as of end-March.

TRADE WAR WOES

Analysts attributed that US trade policies have been the primary catalyst of the domestic market movements during the period.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said that there was a lot of uncertainty in the global markets due to Mr. Trump's unclear intentions on global tariffs.

This uncertainty, he added, will likely persist in the second quarter, "as uncertainty of the postponed and more punitive 'reciprocal' tariffs continues amid their 90-day pause."

Metropolitan Bank & Trust Co. (Metrobank) Chief Economist Nicholas Antonio T. Mapa said that Mr. Trump's stance on "US exceptionalism" was already expected by markets which drove their sentiment in the direction during the period.

For Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., global financial markets were attentive to Mr. Trump's plans and policies, similar with the fourth quarter.

Additionally, he said that new policies, especially on tariffs and taxes, will impact trade and interest rates. He added that gradual economic growth dragged domestic markets as growth expectations turned pessimistic.