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Tariffs

Philippines Seeks to Diversify Trade Amid Tensions with US

Strategic Insights

— 2 min read

The Philippines is exploring alternatives to the United States as a trading partner, driven by concerns over the increasing trade tensions between the two nations. The US imposes a 20% tariff on Philippine goods, with economists debating the advisability of decoupling from the US market. The Philippines' Department of Trade and Industry views the US as a "very important" trading partner, accounting for 10% of its total trade and 17% of its exports. However, others argue that the country should pivot to other markets, such as the European Union, India, and China, to reduce its dependence on the US.

Key Takeaways:

  • The US is the Philippines' top export market, accounting for 15.7% of its total export revenues in the January to May 2025 period, worth $5.38 billion.
  • Economists are divided on the US as a trading partner, with some advocating for decoupling due to the 20% tariff on Philippine goods.
  • The Philippines is negotiating a free trade agreement with the European Union, which can increase exports of agricultural products, industrial goods, and services.
  • Industry leaders suggest exploring other markets, such as India and China, to exploit their strong economic growth and reduce dependence on the US.
  • A former socioeconomic planning secretary believes it seems impossible for the Philippines to have a free trade agreement with the US under the Trump administration.
  • The country may benefit from building its exports on domestic inputs with higher value-added and negotiating with other groups like ASEAN, ANZ, Japan, South Korea, and BRICS.

Statistics:

  • The US accounts for 10% of the Philippines' total trade and 17% of its exports.
  • The Philippines' exports to the US were worth $5.38 billion in the January to May 2025 period.
  • The US tariffs on various Philippine products are: agricultural products, 20% (in addition to existing tariffs); industrial goods, 20% (in addition to existing tariffs); and services, subject to different rates (25% for auto and auto parts, 50% for steel and aluminum products).
  • The Philippines is negotiating a free trade agreement with the European Union, which can increase exports of agricultural products, industrial goods, and services.

Sources:

  • BusinessMirror, "US set to impose 20% tariff on PH exports after August 1"
  • Department of Trade and Industry (DTI) Undersecretary Allan B. Gepty's Viber message to BusinessMirror
  • Ateneo De Manila University (ADMU) economist Leonardo Lanzona's interview with BusinessMirror
  • Confederation of Wearable Exporters of the Philippines (Conwep) Executive Director Maritess Jocson-Agoncillo's Viber message to BusinessMirror
  • De La Salle University (DLSU) economist Maria Ella Oplas' Viber message to BusinessMirror
  • Philippine Statistics Authority (PSA) data on the Philippines' exports to the US in the January to May 2025 period.

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