Trump’s reciprocal tariffs seen slowing PH growth, disrupting exports

The Philippine economy is expected to face modest headwinds from the sweeping new tariff policy unveiled by US President Donald Trump this week, with analysts warning of export declines, slower industrial output, and increased inflationary pressure if retaliatory trade measures escalate.

Key Highlights:

• PH tariff rate: US sets 17-percent reciprocal tariff on Philippine goods.
• Growth risk: BPI forecasts 0.5-percent drop in GDP growth to 5.8 percent for 2025.
• Export contraction: PH exports expected to decline by 4.2 percent.
• Industrial impact: Output could fall by as much as 1.7 ppts.
• Inflation concern: Weaker peso and supply disruptions may pressure BSP policy.
• Geopolitical uncertainty: Ongoing talks may alter scope and severity of impact.

Effective April 5, the United States will implement a 10-percent reciprocal tariff on all imports, with steeper duties—up to 46 percent—on select countries starting April 9.

The Philippines will face a 17-percent tariff under this framework, one of the lowest among affected nations but still a potentially disruptive blow to export competitiveness.

“The newly imposed tariff is expected to raise costs for Philippine exporters, making their products less competitive in the US market,” said Jun Neri, lead economist at Bank of the Philippine Islands (BPI). “Key sectors likely to be affected include electronics and agricultural products.”

Jun Neri

BPI's lead economist expects the Philippine economy to take a hit from Trump's tariffs.

While the US remains one of the Philippines' top trading partners—accounting for roughly 17 percent of the country’s total exports in 2024—Neri noted that the Philippines is relatively insulated compared to its ASEAN peers. US trade accounts for just 1 percent of Philippine gross domestic product (GDP), the lowest in the region.

Nevertheless, BPI estimates suggest a 0.5-percent reduction in GDP growth could result from diminished export demand and disruptions to global supply chains. This would lower the 2025 growth forecast from 6.3 percent to 5.8 percent.

Industrial output could contract by up to 1.7 percentage points, while exports may swing from projected growth of 6.1 percent to a contraction of 4.2 percent.

Imports are also forecast to slow from 7 percent to just 1 percent, reflecting adjustments in production and inventory levels amid weaker overseas demand.

Meanwhile, the peso could come under renewed pressure from market volatility, as investors weigh the risks to export performance and macroeconomic stability.

A weaker currency would raise import costs and potentially drive inflation closer to or above the Bangko Sentral ng Pilipinas’ 4 percent target, reducing the space for interest rate cuts.

The 17 percent tariff rate for the Philippines is based on current announcements, but could still be revised if ongoing negotiations yield exemptions or adjustments.

Neri also warned of indirect effects—such as global oil price reductions or trade diversion from China—which could offer partial relief but would not offset the broader contraction in trade.

While the impact remains manageable for now, BPI stresses the need for close monitoring of trade developments and exchange rate movements in the coming weeks.