Trump tariff seen costing Phl P94.5B

The Philippine economy could face potential losses of up to $1.89 billion (P94.5 billion) annually due to the 17-percent tariff imposed by US President Donald Trump on the country.

Based on data gathered by DAILY TRIBUNE, the losses could arise from weaker exports, with manufactured goods, particularly mechanical and electrical equipment, bearing the brunt as they currently benefit from low or zero tariff rates in the US market.

The new tariff on exports was part of the US government’s sweeping “Liberation Day” trade policy that targeted over 180 countries. Philippine economic officials, however, see a silver lining in the shifting American trade winds. (See related stories).

The levy, announced on 2 April in the White House Rose Garden and on Trump’s Truth Social account, will take effect on 9 April.

The country’s Southeast Asian neighbors face significantly higher tariffs: Vietnam at 46 percent, Thailand at 36 percent, Indonesia at 32 percent, and Malaysia at 24 percent.

The tariff slapped on the country was higher than that on Singapore at 10 percent. The European Union will have to deal with a 20-percent tariff.

On the other hand, China imposed a 34-percent reciprocal tariff.

An analyst said the Philippines could face a substantial decline in exports to the US of electronics, semiconductors, machinery, and agricultural products, primarily coconut oil and seafood.

This vulnerability stems from the Philippines’ reliance on the US, which accounted for nearly 16 percent of its exports in early 2025.

However, a trade diversion could offset some losses, with a net reduction possibly closer to $1.6 billion if the Philippines redirects its goods to alternative markets like China, ASEAN countries and Europe.

Lower demand

The tariff would increase the cost of Philippine goods in the US, potentially reducing demand.

The Philippines is deeply integrated into global supply chains, particularly electronics and intermediate goods.

Sweeping US tariffs could disrupt these networks, especially if they trigger retaliatory measures from other nations or shift production away from US-reliant markets.

While the Philippines might not benefit significantly from high-technology supply chain shifts due to its focus on assembly rather than cutting-edge production, it could see opportunities in lower-value activities like packaging if other countries face steeper tariffs.

Bank of the Philippine Islands lead economist Jun Neri said that among the ASEAN-5 biggest economies, the country appears the least vulnerable to tariff adjustments.

“As a predominantly domestic-driven economy, we are better positioned to weather the potential negative impacts of the new trade restrictions. Our exports (goods and services) account for around 23 percent of our gross domestic product (GDP). Still, our trade activity with the US is only one percent of GDP (the lowest in the region), in stark contrast to Vietnam’s 26 percent,” he explained.

While we think the country’s strong domestic consumption base (about 75 percent of GDP) will provide a buffer against external shocks and reduce overall trade vulnerability, we acknowledge certain risks that will bring some adjustments to our economic forecast, he said.

“The Philippines might see indirect benefits from the US tariffs on other countries. Softer global demand could put downward pressure on oil prices, easing import costs,” he added.

Additionally, exporters in countries like China, facing higher tariffs, may redirect their goods to alternative markets, including the Philippines, which could help contain inflation, Neri said.

Finance Secretary Ralph Recto sees the US tariff offensive eventually working in the country’s favor.

“The CREATE MORE Act will strengthen our ability to attract investors looking to expand or relocate to the Philippines, given the relatively lower tariffs imposed on our exports to the United States. We are also actively pursuing more free trade agreements with our global partners,” Recto indicated.

As major competitors like China, Bangladesh, Vietnam, Mexico, and India face higher tariffs, Philippine garment exports may have an advantage of expanding its US market share.

To diversify export markets, Recto said the government continues to actively pursue new and expanded free trade agreements with economies like the United Arab Emirates, the European Union, Chile and Canada.

Remittances, peso may weaken

The US is a significant source of remittances for the Philippines with millions of Filipino workers sending money home, and analysts fear that if tariffs are paired with stricter US immigration policies, such as a crackdown on immigrants, remittance inflows will be reduced.

Weak dollar inflows might depreciate the peso, increasing the cost of imports and fueling inflation, though it could also make exports more competitive if managed carefully.

An economist said Trump’s tariffs should push the Philippines to accelerate industrialization.

The Philippines could mitigate long-term risks from global trade shocks by reducing reliance on US markets and building domestic capacity.

While the Philippines imports less from the US, about 6 percent to 7 percent of total imports, compared to its exports, tariffs could still raise the cost of US-sourced goods like machinery, agricultural inputs and consumer products.

This could contribute to inflation, squeezing household budgets and slowing private consumption, the key drivers of Philippine GDP growth.

Trade realignment

The tariffs could nudge the Philippines closer to China or its ASEAN partners as it seeks to diversify trade. This shift might strengthen regional ties but could complicate its diplomatic balancing act between the US and China, especially amid the tensions in the West Philippine Sea.

Negotiating new free trade agreements with Canada, Europe, and Middle East countries has also been proposed as a buffer.

Economic managers had widened the 2025 growth target to 6-8 percent from 6.5-7.5 percent, reflecting uncertainty from Trump’s trade policies.

Analysts from Moody’s Analytics and S&P echoed the view the impact on the Philippines may be moderate compared to more China-exposed neighbors like Vietnam or Malaysia, thanks to the Philippines’ domestic orientation and trade surplus with the US.

However, a prolonged trade war could significantly drag growth below these targets if global demand weakens, according to an economist.

The immediate effects on the economy include export declines, supply chain challenges, and inflationary pressures, tempered by potential opportunities for trade diversification and industrial development.