US Tariffs on Philippine Exports Face Limited Economic Impact

Nation’s GDP Expected to Withstand New 19% Reciprocal Duty

The Philippines anticipates minimal disruption to its overall economic output in 2025, despite the upcoming implementation of a 19 percent reciprocal tariff on exports to the United States, effective August 1.

Government Assesses Tariff Effects

Finance Undersecretary Domini Velasquez stated on Thursday that the direct impact on the Philippines’ gross domestic product (GDP) this year is projected to be “very limited.” While acknowledging that exports will face repercussions, Velasquez emphasized the need to observe actual outcomes before drawing firm conclusions.

Negotiations and Anticipated Business Activity

The adjusted tariff rate, finalized following President Ferdinand R. Marcos Jr.‘s visit to the US from July 20 to 22, now stands at 19 percent, a reduction from the previously announced 20 percent but an increase from the April figure of 17 percent. Trade Undersecretary Allan Gepty confirmed ongoing discussions with US counterparts regarding the tariff specifics but indicated the 19 percent rate is the current working figure for Friday’s implementation.

“Full year GDP (gross domestic product), very limited. For exports, of course, it will have an impact. But right now they (trade officials) are seeing limited (impact) but we need to see the whole picture.”

—Domini Velasquez, Finance Undersecretary

Velasquez noted a sustained increase in exports, potentially driven by American businesses front-loading purchases to avoid the new, higher tariff. This strategy, she added, is likely bolstering current export figures. The Philippines has set a GDP growth target of 5.5 to 6.5 percent for the year, with first-quarter GDP already accelerating to 5.4 percent.

Global Trade Context

The Philippines’ relatively smaller share of exports to the US compared to global markets is a key factor contributing to the limited anticipated impact. For instance, in 2023, the US accounted for approximately 14.6% of the Philippines’ total merchandise exports, according to the Philippine Statistics Authority. This contrasts with larger trade partners, suggesting that while individual businesses may feel the pinch, the broader national economy is expected to remain robust.

Velasquez commented on the sustained rise in exports, attributing it potentially to US businesses rushing orders to avoid the higher tariff rates. Trade Undersecretary Allan Gepty echoed the sentiment, stating that negotiations with US officials continue, but the 19 percent figure is the anticipated implementation rate.

Outlook for Philippine Exports

The economic managers are targeting a goods exports growth of -2 percent for the current year. Recent data shows a significant rebound, with exports growing by 26.1 percent in June, an improvement from the 15.5 percent expansion seen in May. Officials remain keen to analyze the actual results once the new tariff structure is in place.