In a major breakthrough that could redefine Philippine-US economic ties, President Ferdinand Marcos Jr. on Tuesday announced a one-percent reduction in US tariffs on Philippine exports – seemingly modest on paper, but in reality the public tip of a far-reaching and confidential trade agreement that reshapes rules governing goods, services, and investment between the two allies.

Speaking to Philippine media in Washington, Marcos said the tariff cut – from 20 percent to 19 percent – positions the country among the most favored ASEAN economies trading with the United States, behind only Singapore, which enjoys a 10 percent rate through a bilateral Free Trade Agreement.

“Now, one percent might seem like a very small concession. However, when you put it in real terms, it is a significant achievement,” President Marcos emphasized, describing it as a product of hard-nosed negotiations with US President Donald Trump.

Behind-the-scenes deal, broader implications

The announcement follows months-long negotiations culminating in a confidential but sweeping “US-Philippines Agreement on Reciprocal Trade,” authorized under US Executive Order 14257 in April 2025. The deal rewires key aspects of trade and investment, and deepens economic and strategic alignment between Manila and Washington.

According to the official text of the US-Philippines Agreement on Reciprocal Trade, the deal encompasses liberalized US market access, commitments on digital trade, labor and intellectual property enforcement, and expanded coordination on economic and national security issues.

Among the immediate outcomes: the Philippines will eliminate tariffs on American automobile imports and expand purchases of US soy, wheat, and pharmaceuticals. 

“Our medicines will become more affordable,” President Marcos said.

In turn, Philippine exports – while still subject to a 19 percent US tariff – are expected to benefit from streamlined compliance, reduced inspection delays, and improved access to the American market.

Philippine Ambassador to the US Jose Manuel Romualdez welcomed the development but said it’s only the beginning.

“The lowering of tariff to 19 percent is a good deal for the moment, but there is still more that we can do, and there will still be more discussions ahead,” Romualdez said.

Trump, for his part, praised Marcos as a “very tough negotiator,” adding: “We’ll probably agree to something. But he is a strong negotiator. He loves your country.”

Competitive edge in Southeast Asia

The revised tariff rate now places the Philippines ahead of most ASEAN countries in terms of trade competitiveness with the US. Current US tariff rates on Southeast Asian economies range from 19 to 49 percent, with the Philippines now holding the second-lowest rate.

Meanwhile, the removal of Philippine tariffs on American vehicles is expected to benefit US auto manufacturers, while the increase in US agricultural and pharmaceutical imports is expected to impact local pricing and market access.

Beyond goods, the agreement includes binding provisions on digital trade, foreign investment screening, and alignment on sanctions policy.

The trade deal is also said to guarantee equal treatment for American firms in mining, energy, telecommunications, and infrastructure, with provisions for transparency on state subsidies and financial reporting of government-owned firms.

US agencies such as the Development Finance Corporation and the Export-Import Bank may also support eligible Philippine projects under the agreement.

What comes next?

While both sides highlighted the tariff reduction and automobile access as early wins, much of the agreement remains to be implemented.

“There’s still a lot of detail that needs to be worked out on the different products and the different exports and imports,” President Marcos noted.

With bilateral trade exceeding $20 billion in 2024, the US remains one of the Philippines’ most important economic partners. The latest developments signal a new chapter – one defined not only by lower tariffs, but also by deeper and more complex policy coordination.