‘Bilateral US deal, stronger Asean ties key for PH to weather Trump tariffs’

A former Philippine Finance Secretary has warned that, while the direct impact of new US tariffs on Philippine exports may be modest, the country must respond strategically to mitigate risks and seize potential gains from shifting global trade patterns.

Insider spotlight:

• Philippines faces 10% tariff on exports to US under new Trump policy.
• Teves sees low short-term impact but stresses need for reforms.
• Potential trade diversion offers opportunity if PH improves business climate.
• Policy proposals include FTA talks, ASEAN integration, and SME support.
• Warns of global risk from prolonged U.S.-China trade conflict.

In an analysis piece dated April 12, Margarito Teves — who headed the government’s economic team during the Arroyo administration — examined the implications of the 10-percent tariff on Philippine goods exported to the US under President Trump’s expanded trade protection measures.

This rate, which is lower than the initially expected 17 percent, applies to all non-exempt US trading partners for a 90-day period.

“For now, the anticipated impact of the tariff on the Philippines would likely be minimal given that the economy is largely driven by domestic consumption on the demand side and services sector on the production side. Our US exports only account for around 3 percent of the economy,” Teves said .

Gary Teves

The former Finance Secretary says the country must remain competitive despite the minimal impact of US tariffs.

The US remains the Philippines’ largest export market, accounting for $12.1 billion or 16.6 percent of total exports in 2024. Imports from the US reached $8.2 billion, giving the Philippines a $4-billion trade surplus for the year.

Despite the low immediate impact, Teves cautioned against complacency. He noted that lower US tariffs on Philippine goods relative to China and some ASEAN peers could attract trade and investment diversion to the country.

“US companies could shift their import orders from China and other high-tariff nations to countries with low tariffs like the Philippines,” he said .

However, he stressed that realizing these opportunities would depend heavily on the Philippines’ ability to reduce trade barriers and the cost of doing business.

To address the situation, Teves proposed five policy responses:

1. Bilateral engagement with the US – This includes negotiating the removal of the 10-percent tariff and pushing for a bilateral free trade agreement. He recommended exploring tariff elimination for US imports and addressing non-tariff barriers such as pre-border technical verification and minimum access volume limits on agricultural goods.
2. Diversifying export markets – He suggested accelerating free trade discussions with other countries such as India, the United Arab Emirates, and the European Union.
3. Strengthening ASEAN integration – By harmonizing regulations and reducing regional trade barriers, the Philippines can enhance competitiveness within Southeast Asia.
4. Supporting local exporters – Technical assistance, especially for small and medium enterprises, can help expand into zero-duty markets and absorb redirected demand from China.
5. Improving the business environment – Teves emphasized full implementation of key reforms including the CREATE More Act, amendments to investment laws, and lowering logistics and power costs. He also highlighted the importance of reskilling programs through the Enterprise-Based Education and Training Framework Act .

Looking ahead, Teves flagged the risk of further US-China trade escalation.

“Because of their massive influence on global trade, supply chain, and investment, any further escalation would have a ripple effect on all economies, including the Philippines,” he said.

— Edited by Daxim L. Lucas