[Vantage Point] Understanding Trump’s reciprocal tariff on the Philippines 

Donald Trump’s imposition of reciprocal tariffs presents an opportunity for the Philippines to negotiate a more sustainable and mutually beneficial economic partnership with the US

President Donald Trump’s flexing American strength throughout the world could mean trouble for allies of the United States in the Indo-Pacific region.

This early, we’ve witnessed how the US has been economically decoupling from its long-time allies, a move that could have significant ramifications for Southeast Asia, considering the region’s strategic position between America and China.

As Trump prepares to impose reciprocal tariffs on the Philippines, a brewing trade battle threatens to reshape economic ties between the two nations. With the US trade deficit with the Philippines soaring to $4.9 billion in 2024, Washington is pushing back against what it sees as unfair tariff imbalances. 

Will these aggressive measures force Manila to lower trade barriers, or could they spark a deeper economic standoff? Let’s dive into the key concessions at stake and how this high-stakes move could impact businesses, consumers, and the future of US-Philippine relations.

The United States is poised to take a more aggressive stance on trade with the Philippines as President Trump prepares to impose reciprocal tariffs to counter existing trade imbalances. The move comes amid a widening trade deficit and tariff disparities that have long favored Philippine exports. According to the Office of the US Trade Representative, the US goods’ trade deficit with the Philippines reached $4.9 billion in 2024 — a 21.8% increase from 2023. The Trump administration is seeking to level the playing field and secure more favorable trade terms.

In 2024, total goods trade between the US and the Philippines reached $23.5billion. US exports to the Philippines amounted to $9.3 billion, marking a slight 0.4% increase from the previous year, while imports from the Philippines surged to $14.2 billion, a 6.9% rise from 2023. This growing gap underscores the need for a recalibrated trade strategy.

A major point of contention is the tariff imbalance. While US goods entering the Philippines face an average tariff of 5.5%on non-agricultural goods and 9.8% on agricultural goods, Philippine exports to the US are subject to a significantly lower 2.1% tariff. The Trump administration views this as an unfair barrier to American goods and is set to introduce reciprocal measures to match Philippine duties.

Targeted concessions

Trump’s reciprocal tariff policy is not merely about adjusting duty rates. It is also a strategic maneuver to extract key trade concessions from Manila. The US is expected to push for:  

• Lower Tariffs on US Goods — The Philippines imposes an average tariff of 5.5%on non-agricultural goods and 9.8% on agricultural products, while US exports like machinery and electrical equipment remain subject to high duties. Reducing these barriers would enhance US competitiveness in the Philippine market, boosting exports of these high-value products.

• Trade Balance Adjustments —  In 2024, the US imported $6.2 billion worth of electronic goods from the Philippines, while exporting only $1.8 billion worth of similar products. To reduce this deficit, the US may seek adjustments by encouraging greater Philippine imports of American energy, automotive, and technology products.

• Expanded Agricultural Market Access — US agricultural exports to the Philippines were valued at $3.1 billion in 2024, with significant barriers remaining on pork and poultry. The Philippines’ import tariffs on these products range from 20% to 40%, restricting American farmers’ access to this growing market. Lowering these tariffs would provide a significant boost to US agricultural exports.

• Strengthened Defense and Security Ties — The Philippines has allocated over $2.8 billion for military modernization in 2024; yet, a large portion of its defense procurements come from non-US suppliers. The Trump administration may push for a greater share of these contracts to be awarded to American defense companies, reinforcing strategic military cooperation.

• Enhanced Business and Investment Protections — US direct investment in the Philippines stood at $7.8 billion in 2024, but American businesses face bureaucratic hurdles and foreign ownership restrictions. The US may push for reforms that improve market access and strengthen intellectual property protections, ensuring a more favorable business climate for American firms.

• Reducing Economic Reliance on China — China remains the Philippines’ largest trading partner, with $75 billion in total trade in 2024. The US may offer financial incentives and trade agreements to shift Philippine dependence away from China, particularly in infrastructure and telecommunications projects where Chinese companies currently dominate.

• Labor and Manufacturing Incentives — The Philippines exported $6.2 billion worth of electronics and semiconductors to the US in 2024, highlighting its role in global supply chains. The US may support workforce development programs and regulatory incentives that make the country an even more attractive destination for American manufacturers seeking alternatives to China.

A defining moment for US-Philippines trade

Trump’s imposition of reciprocal tariffs signals a pivotal moment in US-Philippines trade relations. While the move is designed to address long-standing trade imbalances, it also presents an opportunity for the Philippines to negotiate a more sustainable and mutually beneficial economic partnership with the US. 

We must also take into consideration how Philippine economic stability is linked with geopolitics, specifically, the possible reduction in US military presence in the ASEAN region. The US currently plays a key security role in the West Philippine Sea, where Chinese claims of sovereignty conflict with those of littoral Southeast Asian nations. The Philippines is among the countries that would be most vulnerable to this shift, considering how President Ferdinand Marcos Jr. has reinforced military relations with Washington. 

In recent years, Manila has experienced repeated clashes with China’s coast guard, raising fears of an escalation. With a reduced US commitment, ASEAN claimants in the South China Sea — Vietnam, Malaysia, Brunei, Philippines — could feel increasingly exposed to the Chinese threat of aggression. Should Washington signal disengagement with these ASEAN claimants, the  Philippines, in particular, would have to re-evaluate its alignment with the US and may need to seek alternative security partnerships with other countries, such as Japan, Australia, Canada, and India. 

Manila now faces a critical decision: comply with US demands to avoid tariff hikes or risk retaliatory measures that could impact its economy. The outcome of these negotiations will shape the future of bilateral trade, influencing economic and geopolitical dynamics for years to come. – Rappler.com

In this piece, data cultivation and analysis were done in collaboration with Washington-based fund manager Eric Jurado of the Institutional Investor who agreed to team up with Vantage Point from time to time to deliver relevant market and economic valuation for our countless readers.