Despite being slapped with a 20 percent tariff by the United States, Philippine exports remain comparatively less burdened than those of its Asian neighbors, providing a modicum of relief amid a volatile global trade environment.
The latest US import duty on Philippine goods – up from 17 percent in April – places the country in a more favorable position relative to others in the region. Vietnam also faces a 20 percent tariff, but shipments suspected of being Chinese transshipments through Vietnam are subject to a steep 40 percent rate.
Meanwhile, Japan, South Korea, and Malaysia were hit with 25 percent tariffs; China, 30 percent; Indonesia, 32 percent; Bangladesh, 35 percent; Thailand and Cambodia, 36 percent; and Laos and Myanmar, 40 percent.
The new tariffs are part of a broader strategy by US President Donald Trump, who is known for his aggressive trade posturing. Market analysts, however, are cautiously optimistic that these tariffs are merely opening bids in what could lead to lower, negotiated rates before the extended deadline on 1 August 2025. Trump had earlier signaled there would be no further extensions beyond this date.
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), the Philippine economy is less reliant on exports compared to its ASEAN neighbors, and that cushions the overall impact.
He added that since the US remains our largest export market, accounting for 17 percent of total outbound shipments, a 20 percent tariff still poses downside risks for exporters and economic growth.
The frontloading of shipments may have already occurred in anticipation of the tariff hike, lessening the immediate blow. However, the longer-term effect could be a slowdown in demand for Philippine exports, which in turn might dampen GDP growth.
Despite the tariff hike, investor sentiment appears resilient. The Philippine Stock Exchange index (PSEi) rose for the fourth straight trading day, climbing 32.29 points or 0.5 percent to 6,536.68 as of 9:42 AM on 10 July – the highest level in nearly two months. The peso also appreciated slightly to 56.46 against the US dollar.
Global financial indicators also showed stability. The US dollar weakened against major currencies, and US benchmark Treasury yields fell. Fed fund futures priced in -0.54 rate cuts for the remainder of 2025, slightly more than the US Federal Reserve’s own estimate of -0.50. Oil prices remained soft, with NYMEX crude hovering around $68 per barrel.
Ricafort warned, however, that the uncertainty surrounding tariff negotiations could fuel market volatility. While the US economy faces risks of stagflation – a mix of rising inflation and slowing growth – the Philippines could benefit from the situation through possible local policy rate cuts, particularly if domestic inflation stays benign.
Historically, Trump’s tough trade stance has softened during negotiations, earning him the moniker "TACO" or "Trump Always Chickens Out" among analysts. His recent decision to pause higher tariffs from 9 April to 9 July and offer an extension to 1 August suggests a window for compromise.
Still, the broader risks of prolonged trade tensions include weaker global trade flows, reduced business investment, and slower job creation – all of which could weigh on the Philippine economy indirectly.
For now, all eyes are on the ongoing negotiations, with Philippine exporters and investors hoping for a favorable turn before the August deadline.