The Department of Trade and Industry (DTI) said officials and stakeholders view the recent imposition of tariffs by the United States with guarded optimism, saying it could also offer strategic opportunities for the Philippines to improve its economic relations with the US.
DTI Secretary Cristina Roque said that while the direct impact of the new US tariff on the Philippine economy may be less substantial than those imposed on other Asian countries, the DTI will strictly monitor and assess the potential effects of these moves.
In a statement, Roque said the recent US measure has made US imports more expensive so that their domestic manufacturers can compete.
Mutually beneficial trade
“What is equally important for the US is to improve its access to rapidly growing economies such as the Philippines,” Roque explained.
In this regard, Roque said the Philippines will move to actively engage the US in a discussion to facilitate market access to its key export interests, such as automobiles, dairy products, frozen meat and soybeans, within a bilateral free trade agreement framework.
A preferential tariff agreement, she said, “ will allow both sides to pursue mutually beneficial trade.”
Under this arrangement, a government source said that the Philippines and the US can each seek market access from each other, particularly on products of interest to both countries.
US a crucial market
Roque said the US remains a crucial export market for the Philippines, accounting for about 17 percent of total exports as of 2024.
Electronics products comprise 53 percent of these exports, she said, pointing out that about 10 percent of the Philippines’ total trade involves the US.
“Specifically, the US plays a vital role as a major source of our agricultural imports, representing approximately 20 percent of our supply. This underscores their reliability as a partner in ensuring our food security,” she said.
Roque said she has expressed her desire to meet with her US counterpart and is currently awaiting a schedule to discuss strengthening the trade relations between both countries.
PH least hit
As expected, the Philippines is among the least hit among key exporters to the US, based on the tariff table released by the White House on Wednesday.
At 17 percent, the reciprocal tariffs on the Philippines are much lower than those imposed on Cambodia, 49 percent; Laos, 48 percent; Vietnam, 46 percent; Thailand, 37 percent; China, 34 percent; Taiwan, 32 percent; Indonesia, 32 percent; India, 27 percent; Korea, 26 percent; Japan, Brunei, Malaysia, and the EU, 20 percent. The tariff on Singapore is 10 percent.
This also means the Philippines will have the second-lowest tariff among the nine Asean countries that trade with the US.
Reuters reported on Thursday that the US slapped a 26 percent tariff on imports from India, a setback to the South Asian nation’s expectation of relief from President Donald Trump’s global trade policy, which has unnerved world markets for weeks.
A 10 percent baseline tariff starts on Saturday before the remaining, higher reciprocal tariff takes effect on April 9.
“They (India) are charging us 52 percent, and we have charged almost nothing for years and years and decades,” Trump said at the White House, announcing the reciprocal tax.
Roque, in her statement, said some products are exempt from the US impost, including categories of products exported by the Philippines to the US, such as copper ores and concentrates and integrated circuits.
“We are carefully studying the impact of reciprocal tariffs on agri-based products, particularly food exports noting that these are not covered by the exemptions,” she added.
Roque noted the new tariffs also placed the Philippines in a more advantageous position, specifically for certain export products like coconuts.
“With lower tariffs than Thailand, Philippine coconut exports can be more competitive,” she said.
‘Added reason’
Secretary Frederick Go, Special Assistant to the President on Investment and Economic Affairs, said a 17-percent tariff on the Philippines, compared to the rates slapped in ASEAN, “does not look bad.”
“From my perspective, this opens up a lot of opportunities for companies based in countries with higher tariffs to look seriously at investing in the Philippines and set up manufacturing facilities here to take advantage of our relatively much lower tariffs,” Go said.
He said the lower tariff is an “added reason”, aside from the incentives offered under the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE), to attract more American investments and businesses to set up shop in the Philippines.
Palace Press Officer Claire Castro, in a briefing in Malacañang on Thursday, said the low tariff the US imposed on the Philippines is good news and will have minimal impact on the country.
Castro said the 17 percent tariff could be viewed positively, especially since other countries that receive higher tax rates could consider investing in other nations, such as the Philippines.
Good relations
In a text message, DTI Undersecretary Allan Gepty said it is important that the Philippines maintain good relations with the US, taking into account that, in general, the global economy is an ecosystem that does not just revolve around tariffs.
“There are many variables. Thus, we must be circumspect in our approaches and policies,” Gepty said.
“Tariffs can be used to protect local industries, raise revenues, lower the cost of raw materials, intermediate goods and final goods, or level the playing field in terms of competition. Thus, perspective may vary depending on objectives. However, one thing that we should bear in mind is the fact that the global economy is already integrated and that we should operate on the basis of predictable trade rules,” he said.
Agricultural stakeholders said the Philippines would be the least affected in Southeast Asia by the United States tariff adjustments.
Agriculture Secretary Francisco Tiu Laurel Jr., in a briefing in Quezon City on Thursday, said he regarded this turn of events as “somewhat positive,” although he noted that this should be viewed on a per-commodity basis.
Laurel said the Department of Agriculture will develop a definitive list of export products to the US that will be affected positively and negatively so that exporters can shift markets, including the domestic market.
Resilient
Finance Secretary Ralph Recto said the Philippine economy remains relatively resilient amid the global trade shifts following the announcement of US President Donald Trump’s tariff move.
“The Philippine economy is primarily driven by domestic demand rather than exports. This makes us relatively resilient against trade wars,” Recto said in a statement on Thursday.
“However, as with all countries, we are not spared from the impact of the expected decline in international trade and the possible global growth slowdown due to supply chain disruptions, higher interest rates, and higher inflation,” he added.
The DOF said this is an opportunity for the Philippines to become a hub for global value chains, particularly in industries such as electronics, textiles, food, and automobiles.
With the country’s global comparative advantage in coconut oil, the finance department said the Philippines is also in a good position to expand its market share in the US for coconut-based products, including desiccated coconut and copra meal/cake.
The DOF said that as major competitors like China, Bangladesh, Vietnam, Mexico, and India face higher tariffs, Philippine garment exports have an advantage in expanding their US market share.
The DOF said that to diversify export markets, the Philippine government continues to actively pursue new and expanded free trade agreements with economies like the United Arab Emirates, the European Union, Chile, and Canada.
Recto also said the government is leveraging the CREATE MORE Act to attract more investors to locate in the country.
Supply chain, raw material woes
Sergio Ortiz-Luis, president of the Philippine Exporters Confederation Inc., said in a text message that its members will have to adjust their prices to make their exports more competitive than those exported by countries that bore the brunt of the US tariffs.
Ortiz-Luis said the downside is the possible disruption of the supply chain, especially in raw material sourcing.
He said the chances are that raw materials the Philippines sources from countries slapped with higher US tariffs will jack up their prices, giving them leverage.
“We have to adjust our prices too. We have to maintain our competitiveness,” he added.
Ortiz-Luis cited Taiwan, which supplies raw materials for Philippine electronics companies. Tariff on Taiwan is 34 percent.
“We don’t know. They may have to adjust their prices so their products will be competitive compared to the Philippines,” he added.
In separate messages on Thursday, local agriculture producers urged the government to look for alternative markets for its farm exports despite the lower tariff rates set by the US compared to other Asian economies.
Danilo Fausto, president of the Philippine Chamber of Agriculture and Food Inc. (PCAFI), agreed with the DA’s views.
“We will be the least affected by Trump’s tariff war. In the long run, I think the Philippines will be in a better position as the alternative source of US importers versus its neighbors,” Fausto said.
Raul Montemayor, Federation of Free Farmers national manager, said the Philippines should await for the DA’s product-by-product analysis of the US tariff effects.
“One of our major exports to the US are coconut-based products like desiccated coconut that are currently tariff-free. Overall, we have a trade deficit with the US in agriculture, but we need a product-by-product analysis,” he said. – With additional reporting by Jocelyn Montemayor, Angela Celis and Jed Macapagal
