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THE PRESIDENTIAL PALACE on Thursday expressed concern regarding the US choice to raise tariffs on Philippine exports to 20%, as a senior-level delegation is set to travel to Washington next week to negotiate modifications.
The Philippine Exporters Confederation, Inc. (Philexport) also conveyed worries about the diminishment of the country’s trade influence with the US following US President Donald J. Trump’s decision to raise tariffs from the “Liberation Day” rate of 17%.
“We are troubled that, despite our initiatives and ongoing discussions, the US has still opted to enforce a 20% tariff on Philippine exports,” the Trade department stated in a distinct remark.
Nonetheless, Frederick D. Go, special aide to the President for investment and economic issues, mentioned that the new tariff remains the “second lowest” within the Association of Southeast Asian Nations (ASEAN), second only to Singapore’s 10%.
Mr. Trump initially declared the extensive tariff modifications on April 2 — referred to as “Liberation Day” — and instituted a 90-day halt that concluded on July 9.
The US President indicated in posts on his Truth Social media platform that effective Aug. 1, he would implement a 20% tariff on goods from the Philippines, 30% on products from Sri Lanka, Algeria, Iraq, and Libya, and 25% on Brunei and Moldova.
Mr. Go asserted that the Philippine government is engaging in further discussions.
“We remain devoted to persistently negotiating with the United States in good faith to strive for a bilateral comprehensive economic agreement or, if feasible, a free trade agreement,” he remarked during a news conference.
The delegation — comprising Mr. Go, Trade Secretary Ma. Cristina A. Roque, Trade Undersecretary Ceferino S. Rodolfo, and Trade Undersecretary Allan B. Gepty — is scheduled to travel to Washington from July 14 to 18.
“The economic team and the Department of Trade and Industry will continue to promote essential economic reforms to maintain a competitive and investor-friendly business climate,” Mr. Go stated, highlighting the necessity of fostering more global trade connections.
Philippine Ambassador to the US, Jose Manuel “Babe” G. Romualdez, indicated that the Philippines aims to reduce the duty, which remains one of the lowest reciprocal duties in Southeast Asia.
“We are still planning to negotiate that down,” he conveyed in a text message.
‘UNILATERAL IMPOSITIONS’
The Philippine Trade department mentioned it acknowledges the US concerns regarding trade disparities and its initiative to enhance local manufacturing.
“However, global supply chains are intricately connected, and unilateral trade impositions may have detrimental effects on the global economy,” it stated. “Therefore, we advocate for constructive engagement to address trade concerns.”
US goods trade with the Philippines surged to approximately $23.5 billion last year, according to data from the Office of the United States Trade Representative. US exports to the Philippines were recorded at $9.3 billion, a 0.4% increase from 2023, while imports from the Philippines reached $14.2 billion, a rise of 6.9% year on year.
Consequently, the US goods trade deficit with the Philippines expanded to $4.9 billion in 2024, marking a 21.8% increase from the previous year.
Finance Secretary Ralph G. Recto, on his part, stated that the Philippines does not intend to retaliate. “Trade negotiations are ongoing. [There are] no plans to escalate tariffs on US imports,” he told BusinessWorld in a text message.
Despite the elevated tariffs, Mr. Recto expressed confidence that the economy is still projected to grow by 5.5% to 6.5% this year.
Philexport President Sergio Ortiz-Luis, Jr. characterized the US tariff increase as “extremely unfortunate.”
“We do not object to the rise from 17%, except for the fact that some of our primary competitors have received reduced tariffs, especially Vietnam, which stands at the same level as us,” he remarked to BusinessWorld via telephone.
The group raised concerns that the Philippines might struggle to offer trade concessions without negatively impacting local industries.
Mr. Ortiz-Luis pointed out that other nations currently in talks with the US possess greater negotiating power.
“Regrettably, they can negotiate because they hold leverage that we no longer possess since we have already relinquished it,” he noted. “We have allowed the US [military] bases, they are deploying ammunition here, we are procuring used equipment from them, whereas the others are not.”
Mr. Ortiz-Luis urged the government to take the export sector and micro, small, and medium enterprises (MSMEs) more seriously, cautioning that the US tariff could potentially be modified before Aug. 1.
“So far, it has merely been rhetoric in terms of product development, engaging in international trade, and marketing,” he mentioned. “No significant funding is arriving from the government.”
“These are the matters that are being overlooked… These are investments we cannot afford to overlook,” he added.
He also remarked that any future discussions with the US should underscore the country’s limited export capacity.
“We can no longer offer anything. I cannot conceive of anything we can propose on the trade front, except elements that might influence our agricultural imports from the US,” Mr. Ortiz-Luis indicated.
Rather than concentrating solely on the tariff increase imposed by the US, the government should channel its efforts towards export product innovation and market diversification, he advocated.
Despite the 20% tariff, he maintains an optimistic outlook that the nation could still fulfill its revised export objective.
“We have already discarded the Export Development Council’s goal. What we are presently targeting is the PDP target, and I believe we can still reach that,” Mr. Ortiz-Luis stated, referring to the $113.42-billion export target detailed in the Philippine Development Plan (PDP).
Foreign Buyers Association of the Philippines (FOBAP) President Robert M. Young mentioned that Manila should negotiate with Washington for a 10% tariff.
“Secondly, there is the repeated appeal for drastic enhancements to elevate our production capabilities and facilitate business operations to compete and remain relevant to US buyers,” he relayed by telephone.
The 20% tariff might result in diminished exports, hampered economic growth, job risks, and investment uncertainty, Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., indicated in a Viber message.
“Consider diversifying export markets, exploring US-based manufacturing partnerships, and utilizing ASEAN trade networks,” Mr. Ravelas suggested.
He also advocated for a swift acceleration in free trade agreement discussions to mitigate the economic ramifications of the tariff increase.
Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica asserted that further clarification is required regarding the nature of the heightened US tariff.
“There still exists a need to clarify if the 20% is reciprocal or the total tariff,” he said.
‘WAKE-UP CALL’
The Philippine Chamber of Commerce and Industry (PCCI) cautioned that the 20% tariff could adversely impact local industries.
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class=”p3″>“This progress highlights the significance of broadening our export markets, enhancing regional trade alliances and investing in domestic strengths,” PCCI President Enunina V. Mangio indicated in a Viber communication.
She called on the government to amplify its assistance for local enterprises amid increasing global trade challenges.
Ser Percival K. Peña-Reyes, director at the Ateneo Center for Economic Research and Development, commented that the 20% tariff is “still comparatively lower” than most of the Philippines’ neighbors “thus there’s still the capability to attract businesses from other locations.”
However, investors will not be inclined to enter unless the Philippines enhances its competitiveness, he noted in a Viber communication. He mentioned that tax incentives, lower corporate income taxes, duty-free importation of machinery and raw materials, and funded infrastructure could entice investments.
At the same time, former Tariff Commissioner George N. Manzano stated that the Philippines finds itself in a comparatively advantageous position compared to other export-driven nations due to the reduced tariffs and the exemption of essential goods like semiconductors.
“It’s not quite as challenging as other exporting nations, like perhaps Bangladesh — it exports a significant amount of garments, which are not exempted,” he remarked over the phone.
Trade Justice Pilipinas argued that the increased US tariffs should act as a “wake-up call” not only for the Philippine government but also for the greater ASEAN region.
“The current tariff increase extends beyond a mere trade concern; it unveils the inherent weaknesses of an export-reliant developmental approach that makes our economy vulnerable to global markets and the political caprices of foreign leaders,” it asserted in a statement.
The organization encouraged the Philippines to seize this moment as a chance to reinforce connections with regional partners.
The latest announcement should motivate the Philippines to reconsider and fortify regional unity within ASEAN, it added. — Chloe Mari A. Hufana, Justine Irish D. Tabile and Aubrey Rose A. Inosante with Reuters
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