Philippines Poised for Trade Advantage Amid U.S. Tariff Overhaul

A study reveals that the Philippines is among the least exposed Southeast Asian economies to U.S. tariffs. While facing a 17% tariff rate, it benefits from broader exemptions. However, it needs to improve infrastructure and investment to capitalize on these advantages compared to Malaysia and Vietnam.

The Philippines could gain significant benefits from the recent U.S. tariff overhaul, according to a study indicating that the country is among the least exposed Southeast Asian economies to these new duties. Although the global trade wars initiated by U.S. tariffs have impacted the nation, its relative exposure remains lower than its regional counterparts like Malaysia, Thailand, Indonesia, and Vietnam, with a modest 17% tariff rate.

Infrastructure and investment shortcomings, however, impede the Philippines from taking immediate advantage of its favorable tariff position. In contrast, Vietnam and Thailand face steeper tariff rates of 46% and 36%, respectively, albeit paused until mid-year. The Philippine Institute for Development Studies developed a Tariff Exposure Composite Index that places the Philippines and Indonesia in a moderate risk category, though the two countries differ in their specific exposures.

The Philippines stands to attract trade and investment shifts, benefiting from exemptions covering approximately 33% of its exports to the U.S., predominantly in sectors such as semiconductors and memory chips. The study, led by former Trade Undersecretary Rafaelita Aldaba, suggests that the Philippines has a strategic advantage with a low tariff rate and strong exemption protections. To realize its potential benefits, the nation must enhance its logistics, investment facilitation, and export promotion strategies.

(With inputs from agencies.)