US tariff increase a ‘major headwind’

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A 20-PERCENT tariff imposed on Philippine goods bound for the United States poses a threat to the export industry and could spill over into the broader economy if not addressed, analysts warned.

Philippine Institute for Development Studies senior fellow John Paolo Rivera said the 20-percent duty — higher than the 17 percent announced last April — would particularly hit the electronics, garments and agricultural sectors that are heavily reliant on the US market.

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“The 20-percent US tariff on Philippine exports is a major headwind for the economy,” Rivera said.

“It could lead to lower export revenues, reduced factory activity, job losses and weaker in-vestor confidence, especially among firms that are deeply integrated into global supply chains.”

The US is the Philippines’ largest export destination, accounting for roughly 17 percent of total outbound merchandise shipments. Any slowdown in trade with the US due to higher tariffs could pull down overall export growth and, by extension, economic performance, Rivera said.

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He said the government should respond decisively to cushion the impact, underscoring the need for a “diplomatic engagement through open high-level discussions with the US to clar-ify the scope of the tariffs and push for exemptions or adjustments.”

At the same time, Rivera said the Philippines should reduce its overreliance on the Ameri-can market by expanding trade ties with other economies, particularly through the Asean Free Trade Area, Regional Comprehensive Economic Partnership and the European Union’s trade preference programs, among others.

Domestically, he said the government should support affected exporters by improving the ease of doing business and accelerating the rollout of logistics and digital infrastructure to boost overall competitiveness.

Rizal Commercial Banking Corp. chief economist Michael Ricafort, meanwhile, noted that the 20-percent tariff was still among the lowest compared to other Asean and Asian coun-tries hit by similar US measures.

“The latest 20-percent US import tariff on Philippine goods is not a complete surprise,” he said. “Other countries received higher rates.”

These include 25 percent for Japan, South Korea and Malaysia; 30 percent for China; 32 percent for Indonesia; 35 percent for Bangladesh; 36 percent for Thailand and Cambodia; and 40 percent for Laos and Myanmar.

Vietnam, which has secured a reduced 20-percent tariff, could be penalized with a 40-percent duty for goods suspected of being transshipped from China.

Ricafort noted that these tariffs remained subject to negotiations with an Aug. 1 deadline — a date the US said would not be extended.

“There is still room for compromise, especially given the TACO trend — ‘Trump Always Chickens Out’ — where initial threats of high tariffs are used as a negotiation tactic before settling on lower final rates,” he said.

While the overall hit to the country’s gross domestic product may be limited due to the Phil-ippines’ relatively small export base compared to other Asean countries, Ricafort warned that the impact on affected industries would still be significant.

Philippine merchandise exports are three to five times smaller than those of neighboring economies, he said, making the economy less vulnerable to external trade shocks.

However, a prolonged decline in export demand, especially from the US, could eventually lead to weaker manufacturing output, slower hiring and softer economic growth.

“The 20-percent rate makes our exports to the US more expensive, which could impact de-mand from US buyers,” China Bank Capital Corp. Managing Director Juan Paolo Colet said.

“That said, we still have the lowest tariff among emerging markets in the region, so this could potentially give our country a competitive advantage,” he added.

Unicapital Group Research Head Wendy Estacio-Cruz, meanwhile, said “the Philippines should remain relatively resilient due to its less reliance on exports.”

“Our country remains largely driven by domestic demand, remittance inflows and growing trade ties outside the US,” she added.

However, Estacio-Cruz warned that the consumer and manufacturing sectors may feel the pressure from rising input costs.

“Expanded tariffs, especially without swift negotiation could dent export growth, particular-ly in high-value manufacturing,” she said.

Banks could also see “slower credit growth due to delayed expansion in trade-exposed sec-tors like electronics and manufacturing.”

AP Securities research head Alfred Garcia, for his part, said that much of the tariff news had already been absorbed by the market.

“Exports to the US remained stable even after the initial announcement of tariffs in April,” he noted.

“The tariffs are higher, yes, but not prohibitive enough that it would deter US importers from buying Philippine products.”

Investment & Capital Corp. of the Philippines Senior Managing Director Mariano Ocampo said the competitiveness of Philippine exports would be key.

“We are on 20 percent. If other exporting countries are at higher than 20 percent tariff then we would be OK,” he said.

“This should have been factored in already, and I am sure the first thing that our trade offi-cials will do is to renegotiate.”

Trade negotiations, the analysts said, could lead to a much lower final tariff before the duty kicks in on Aug. 1.