September Market Update: Trump Tariff Fallouts, Flood Control Scandals, and the Direction of Philippine Investors
- Patricia Dela Cruz, Margaret Igualada, Kendrick Ong, Yvonne Pimentel
- 6 hours ago
- 7 min read
Authored by: Patricia Dela Cruz, Margaret Igualada, Kendrick Ong, Yvonne Pimentel
Edited by: Justin Choi, Hans Elma, Dennis Go, Jared Go
Latest Economic Data
Philippines Economic Data
Labor Force Situation (July)
Unemployment: 5.3%
Underemployment: 14.8%
US Economic Data
Unemployment Rate: 4.3%
YoY CPI: 2.9%
Federal Funds Rate: 4.25%
September marks key releases in US data, along with continuing implications of Trump administration policy, which continue to weigh on the wider international economic climate. On the domestic end, recent political uncertainty and rising risks stagger market growth even amidst favorable monetary and macroeconomic conditions.
Fed Rate Cut
On September 17, 2025, the US Federal Reserve cut its key interest rate by 0.25 percentage points to 4.25% from 4.50% (Mutikani, 2025). This marks the first cut of 2025, after the Fed kept rates high for over a year to fight inflation (Wilson & Yeung, 2025). This cut signals a notable pivot in US monetary policy, shifting towards a slightly more expansionary outlook.
Federal Reserve Chair Jerome Powell explained “the balance of risks has shifted,” citing larger threats from weakening US employment. Recently released labor statistics for the US saw unemployment rising to 4.3% in August from 4.2% in the previous month, with only 22,000 jobs added in August (Federal Reserve Bank of St. Louis, 2025). Powell clarifies the need for revised data given the low response rates and inaccurate collection that might have caused the unemployment data’s rise, although clear signs have shown that the job market is weakening in the U.S. Powell further cites lower immigration, tariffs, and fiscal uncertainty as additional justification for the Fed’s rate decision (Wilson & Yeung, 2025). According to Nela Richardson, September’s job growth has been slower than estimated–with a reduction of 43,000 jobs compared to pre-benchmarked data, forecasts have stated that the unemployment rate would hold steady at 4.3% (Wallace, 2025).
Unemployment taking center stage has shifted inflation to the backseat. While still above 2% at 2.9%, US inflation has ceased accelerating, potentially owing to currently limited price pressures from instituted tariffs (Bureau of Economic Analysis, 2025; Mikolajczak, 2025). However, inflation remains a lingering concern, as expectations have ticked upward. One-year-ahead inflation expectations rose to 3.4% from 3.2%, while five-year expectations increased to 3.0% from 2.9% (Federal Reserve Bank of New York, 2025). While recent data on actual inflation recorded in August, stood at 2.9% (U.S. Bureau of Labor Statistics, 2025b). Strong US GDP growth is evident (3.8% from Q1) in Q2, although 65-70% is held up by consumer spending. Policy uncertainty and tariffs have also caused trade in the US to plunge with a decline of 29.3% (Boussour, 2025).
However, despite indicators that the Fed is moving towards more expansionary policy, Powell also states that “a quarter point won’t make a huge difference” (Wilson & Yeung, 2025). The Fed may consider another rate cut before year-end if labor market weakness deepens or if business investment continues to soften (Reiman, 2025). Persistent uncertainty surrounding fiscal policy and upcoming federal budget negotiations may also weigh on confidence, potentially prompting the Fed to act more decisively.
Reports for the third-quarter economic reports in the U.S. have been delayed due to the ongoing government shutdown, temporarily suspending the publication of key indicators such as inflation, unemployment rate, GDP, and its components (Becket et. al., 2025). One of which are the net exports, a crucial indicator given the impact of tariff policies imposed during the Trump administration–consensus holds that these tariffs have yet to fully take effect in the economy and may influence employment indirectly. At present, the Bureau of Economic Analysis (BEA) (2025) has only released estimates for Q1 and Q2 2025. Forecasts for U.S. GDP in the third quarter suggest slower growth (Federal Reserve Bank of New York, 2025).
PH Monetary Policy
On the domestic side, the fiscal end of national policy remains the Philippines’ largest concern for the near future, leaking over into how the financial and monetary sides adapt to changing circumstances. Investor sentiment and market response has seen continuing declines in spite of solid monetary policy, though potentially aided by recently released data. July unemployment and underemployment spiked to 5.3% and 14.8% from 3.7% and 11.4% in the previous month, respectively, somewhat giving context to July’s lower 0.9% inflation rate (Philippine Statistics Authority, 2025b).
On the other hand, August inflation quickened to 1.5%, driven by price increases in food and non-alcoholic beverages, a subtle indicator of rebounding consumption from the previous month (Philippine Statistics Authority, 2025a). However, positive outlooks based on data will likely have to stall for the moment as financial institutions reassess strategies moving forward. Despite previously stating the key rate to be in a “Goldilocks zone,” stagnating investment and growth attributable to present issues may push the BSP towards even more expansionary policy and further rate cuts.
Flood Control and Souring Investor Sentiment
Though market movements and monetary policy remain tame for the moment, fiscal decisions and recent political upheavals could potentially signal a negative shift in investor sentiment and the Philippines’ credit relationships with foreign entities.
The most defining feature of September has to go to the numerous corruption scandals that erupted in the Philippines over ghost infrastructure, projects funded and approved but never materialized (Dizon, 2025). Though national unrest has forced the current administration’s hand to take some action, damage may have already been done, and a shaky Filipino market may take more blows if foreign investment is pulled out due a lack of credibility in the domestic system.
The PSEi saw a continuous decline over the last two weeks of the month to close at 5,953.46 points on the last day of September, owed to US economic uncertainties but primarily to weakening investor confidence due to heightened political risks (Loyola, 2025). This dip marks the lowest the index has dropped to since April 7, after Donald Trump’s announced “Liberation Day” tariffs. The disappointing -7.52% YTD performance of the PSEi is made even more stark compared to SEA neighbor Vietnam, who while also taking blows on April 7, rebounded to grow 37.95% YTD. Financial outlooks could continue to look grim if current risk climates refuse to abate.
Long-term and foreign investors will likely show concern over a market growing only 1.79% in five years, proven by recent selling pressures driven by foreign entities spooked by scandals and a depreciating peso (Cigaral & Adonis, 2025; Morales, 2025).
Narratives on the wider macroeconomic side are functionally similar. Foreign investors have become increasingly more hesitant to continue doing business in the country due uncertainties, delays, and unusually high costs (Campos, 2025). South Korean president Lee Jae-Myung publicly announced the withholding of a 29 billion peso loan to the Department of Agrarian Reform; and though refuted by the Department of Finance, is yet another signal of rising aversion to foreign investment in the Philippines (Cupin, 2025).
Foreign Investor Confidence in the Philippines
In 2025, the Philippines experienced a sharp contraction in foreign direct investment, with net inflows falling 23.8% in the first half of 2025 when compared to the previous year. This retreat was driven primarily by steep declines in net equity placements, which fell 74.57%, and debt instrument investments, which contracted 8.21%. While reinvested earnings remained resilient, rising 11.48%, investor caution was evident in May and June when equity withdrawals nearly tripled from USD 46 million to USD 187 million, flipping net changes in equity negative for the first time in 2025 (Bangko Sentral ng Pilipinas, 2025).
While FDIs account for only around 1.9% of the country’s GDP, its importance lies in its role as a non-debt source of capital critical for industrial expansion, employment generation, and technology transfer (World Bank, 2024). Sustained declines in FDI diminish productive investment in export-oriented industries, narrow the channels for technology spillovers, and constrain innovation-led growth. Financially, weaker FDI inflows also pressure the balance of payments and peso stability, as the economy becomes more reliant on volatile short-term capital flows to finance its current account deficit.
Overall, as developments across the international and domestic markets unfold, investors should continue to tread with increased caution over the potentialities of short term shocks in all sectors.
References
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