1% cut: Hurts more than it helps

So the US shaved one percent off the tariff for select Philippine products from 20 percent to 19 percent? Big deal? Forget the hype. It’s like your rich neighbor tosses you a breadcrumb after charging you sky-high “market access” fees for years and slamming the door on your best stuff.

Look closer. For example, if a Philippine company sends $10,000 worth of dried mangoes to the US, it now saves... $100. That’s it. That $100 is easily eaten up by shipping costs, port delays, and other fees. It doesn’t make Philippine goods suddenly cheaper or more competitive in the huge US market.

The goods getting this cut are niche products like handicrafts and tropical fruit snacks. The Philippines’ real big exports to the US — like electronics and machinery — didn’t get any tariff reduction. So, this “gift” doesn’t actually help the main parts of the Philippine economy that trade with the US.

It’s a move branded as a “trade goodwill gesture,” though less an economic breakthrough and more a diplomatic sleight-of-hand.

While framed as progress, this marginal adjustment reveals uncomfortable truths about unequal US-Philippine trade dynamics and Manila’s weak negotiating position.

Consider this context: The US maintains an average 1.4-percent tariff on all imports globally, but imposes 19x that rate (even post-cut) on specific Philippine goods. Meanwhile, the Philippines charges just 4.5 percent on average for US imports. Sadly, this lopsided arrangement persists; the US buys 16 percent of Philippine exports — to extract concessions without reciprocity.

The Philippines lost its competitive edge in the US market after the US imposed a uniform 19 percent tariff on imports from several ASEAN competitors — Indonesia, Cambodia, Malaysia and Thailand, effective 7 August.

Previously, Philippine exporters tolerated the high 20-percent tariff because competitors faced even higher rates. The new equal 19-percent rate for these key ASEAN rivals eliminates this crucial price advantage.

While the Philippine tariff was slightly reduced from 20 percent to 19 percent, this was the smallest discount among the affected ASEAN nations. Others received much larger cuts, like Indonesia from 32 percent, and Thailand and Cambodia from 36 percent. Crucially, major competitors Japan and South Korea secured even lower rates of 15 percent.

Analysts warn this erodes the Philippines’ “margin of preference,” undermines competitiveness, and severely limits opportunities for trade diversion (where US buyers shift orders to avoid tariffs on other countries).

The timing reeks of geopolitical maneuvering, they say. This tiny cut came at a time when the US wants the Philippines as a strong ally against China. The Philippines could have pushed for much more important things, but didn’t — no push for reinstating the Generalized System of Preferences (GSP), which was revoked in 2020, allowing many Philippine products (over 5,000 types) to enter the US duty-free; no demands to lift non-tariff barriers (e.g., restrictive FDA rules on Philippine seafood); and silence on US agricultural subsidies that undercut Filipino farmers.

Celebrating a 1-percent tariff cut is synonymous with applauding a rain shower during a drought — it ignores the dry, cracked ground beneath.

Until Philippine leaders stand up firmly and demand truly fair treatment — like getting the hugely beneficial GSP program back — these tiny “gifts” will just keep the Philippines in a weak position, and the “trade goodwill” will remain a euphemism to our disadvantage.