U.S. tariff to prompt trade executives in protecting Philippine industries at 19% level
The Philippines and the United States have reached a revised tariff agreement, with Filipino exports to the U.S. now subject to a 19% duty, down from a previously planned 20%. In exchange, the Philippines is offering zero tariffs on certain U.S. imports, notably American automobiles, by removing tariffs on these vehicles.
The specific products and industries covered under the market access commitments include American automobile imports to the Philippines, which will now be tariff-free. However, the details regarding particular Filipino products and industries benefiting from tariff reductions beyond the general rate adjustment are not yet explicitly disclosed.
The Philippines will remove tariffs on American cars, allowing tariff-free imports of U.S. automobiles into the Philippine market. Conversely, the 19% tariff on Filipino goods entering the U.S. remains in place, with no detailed product exclusions or special provisions disclosed so far. The deal emphasizes tariff adjustments, while other details remain subject to ongoing negotiations.
The 19% tariff on Philippine exports to the U.S. is lower compared to other Southeast Asian countries. For instance, Laos imposes a 40% tariff, Cambodia a 36%, Malaysia a 25%, Vietnam a 46% on transshipments, and Singapore a 10%. CreditSights anticipates the US tariffs to have a limited impact on the Philippines' economy.
The impact on the Philippine economy is largely due to the country's economy being fueled by domestic demand, as per ADB senior country economist Jacqueline Connell. However, she also warned of potential disruptions in global supply chains, changes in investment patterns, and interactions with financial markets. Moreover, she cautioned that broader effects of a global slowdown and trade uncertainty could weigh on growth.
Despite these potential challenges, both BMI and CreditSights' sovereign analyst expect growth in the Philippines to remain resilient, with full-year 2025 GDP growth close to the lower bound of the central bank's 5.5% target range. Connell emphasized the importance of improving the investment climate and infrastructure to enhance competitiveness.
The Philippine government is working closely with relevant stakeholders to finalize the remaining details of the agreement. The concessions the Philippines will extend are strategic and include products that are not locally produced and are critical inputs, such as reducing the cost of healthcare. Excluded from the concessions are sugar, corn, rice, chicken, fish, and seafood to protect local farmers and fishers.
In conclusion, the revised tariff agreement between the Philippines and the United States primarily focuses on American automobile imports to the Philippines being tariff-free, while Filipino exports to the U.S. face a uniform 19% tariff without detailed product exclusions or special provisions disclosed so far. The agreement is expected to have a limited direct impact on the Philippine economy, but broader effects of global trade uncertainty could potentially impact growth. The specifics of the agreement, including covered products and market access commitments, are still under negotiation between the two nations.
- The revised tariff agreement between the Philippines and the United States displays a focus on the business sector, particularly American automobile imports to the Philippines, which will be free of tariffs, and Filipino exports to the U.S., subject to a 19% duty.
- The Philippine government is looking to improve its competitive edge by offering strategic concessions on certain products, such as critical inputs for the healthcare industry, while protecting local farmers and fishers by excluding sugar, corn, rice, chicken, fish, and seafood from these concessions.
- The deal is anticipated to have a limited direct impact on the Philippine economy, but the broader effects of global trade uncertainty, disruptions in global supply chains, changes in investment patterns, and interactions with financial markets could potentially weigh on the country's growth.
