How U.S. Tariffs Could Impact the Philippines: Risks and Opportunities

The United States has recently imposed new tariffs on imported goods, including a 10% universal tariff and a specific 17% tariff on products from the Philippines. This move may affect the country’s export performance and trade relations with its long-time ally.

Opportunities from Trade Diversion

According to National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan, the Philippines could benefit from trade diversion. As the U.S. increases tariffs on Chinese goods, buyers may look to other suppliers, including the Philippines. NEDA’s initial estimates suggest that exports to the U.S. could increase by around 2%, adding about 0.5% to the country’s GDP.

This shift is already showing signs. Philippine exports to the U.S. reached $1.13 billion in January 2025, up from $947.8 million in December 2024. This increase indicates growing demand and potential for stronger trade ties.

Challenges and Defense Concerns

Despite the positive outlook on exports, the overall impact on the Philippine economy may still be limited. Exports account for a small share of GDP, which is mainly driven by household consumption. Even if exports grow, the broader economic effect might remain modest.

There are also concerns in the defense sector. Philippine Ambassador to the U.S. Jose Manuel Romualdez warned that the tariffs might affect the country’s ability to finance major defense deals. The Philippines is planning to buy $5.58 billion worth of F-16 fighter jets from the U.S., and higher costs due to tariffs could force the government to reconsider or delay the purchase.

Diplomatic and Trade Efforts

The Philippine government is actively working to address these concerns. A delegation led by Special Assistant to the President for Investment and Economic Affairs Frederick Go is set to visit Washington in May. The goal is to discuss the tariff issue and look for mutually acceptable solutions.

At the same time, the Philippines is pushing to diversify its export markets. Secretary Balisacan stressed the need to strengthen trade ties with the European Union, Middle East, and India to reduce the country’s reliance on U.S. trade. (ASC)