Philippine exports seen resilient despite 12.5% US tariff

By Beatriz Marie D. Cruz, Senior Reporter

THE PHILIPPINES’ merchandise exports are expected to weather the United States’ 12.5% tariff as exemptions for key products, particularly electronics and agricultural goods, help cushion the impact, analysts said.

However, vulnerable sectors such as garments and leather goods risk losing their competitiveness, which could force companies to cut jobs, they added.

“If Philippine semiconductor and other electronic exports continue to be exempt under the Section 301 measures, as they were under the earlier tariff regime, the overall impact of the new tariff on bilateral trade should be manageable,” Former Tariff Commissioner George N. Manzano said in a Viber message.

On July 24, the US government imposed new tariffs on 60 trading partners, including the Philippines, over allegations that these countries were not doing enough to stop the imports of goods made with forced labor.

The US slapped the new 12.5% tariff on Philippine-made goods, which replaced the 10% baseline tariff on Philippine exports, which expired also on July 24.

The Department of Trade and Industry earlier said that $11.98 billion worth of Philippine exports, including key electronic, mineral and agriculture products, are exempt from US tariffs.

“It is worth noting that for most of the first half of the year, Philippine exports were already subject to the US’ 10% global tariff, yet bilateral trade performance remained robust,” Mr. Manzano said.

The United States was the Philippines’ top export market in the January-to-June period, with exports up 27.7% to $8.44 billion from $6.61 billion in the same period last year, according to Philippine Statistics Authority  data.

“With the removal of the 10% global tariff and its replacement by the 12.5% Section 301 tariff, the effective increase in the tariff burden on Philippine exports is only 2.5 percentage points,” Mr. Manzano noted.

Washington accounted for 18.1% of the country’s exports during the first six months of the year.

“The 12.5% tariff is a headwind, not a knockout blow. The key is to help affected exporters stay competitive while accelerating market diversification and moving up the value chain,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

However, about $6.25 billion or 34.28% of Philippine-made goods exported to the US, such as leather and travel goods, apparel, footwear, and toys, are exposed to the new levy.

Francisco Cid L. Terosa, a former dean at the University of Asia and the Pacific School of Economics, said while the 12.5% tariff spared the Philippines’ major exports, the affected sectors risk losing their competitiveness.

“It is worrisome that these exports are produced by industries that have low margins and greater labor demand, as the tariff can make them lose competitive advantage and force them to lay off workers,” he said in an e-mail.

“Given these contrasting effects on our export sectors, I think the trade deficit will widen further in the second half of 2026, averaging about $4 billion to $6 billion per month,” Mr. Terosa said.

The country’s trade-in-goods deficit widened by 25.86% to $30.81 billion in the first half of 2026, amid the double-digit growth in both imports and exports.

In the first half of the year, merchandise exports jumped by an annual 13.1% to $46.72 billion, while imports surged by 17.84% to $77.53 billion during the period.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said state support for tariff-hit industries should go beyond providing subsidies.

“Government support should focus on cash flow: faster duty drawback and VAT (value-added tax) refund processing, working-capital loans for exposed exporters, and stepped-up efforts to diversify into markets like the European Union and Canada,” he said in a Facebook Messenger chat.

Mr. Lanzona noted that the country’s trade deficit is set to widen as the growth in exports and imports has been well above the government’s targets this year.

The Development Budget Coordination Committee expects imports and exports to grow by 5% and 3% respectively, this year.

FREE TRADE AGREEMENT
Meanwhile, the Philippine government is betting on its free trade agreements (FTAs) to help exporters look beyond the US and explore other markets, Trade Secretary Maria Cristina A. Roque said.

“Just by looking at the growth of the exports, the world is our market, not just the US. So, we need to get these FTAs going so that we can also penetrate the bigger markets of the world,” she said in an interview on Money Talks with Cathy Yang on One News on Monday.

The Philippines is slated to conclude five FTAs this year, Ms. Roque said.

She earlier noted that the country is on track to finish negotiations for its bilateral FTAs with Canada and the European Union, as well as the updated Japan-Philippines Economic Partnership Agreement, within the year.

The Philippines signed free trade deals with the United Arab Emirates in January and Chile in July — its first FTAs with a Middle Eastern nation and a Latin American country, respectively.