‘Trump tariffs to impact Philippine exports, growth’

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April 5, 2025 | 12:00am

MANILA, Philippines — The 17-percent reciprocal tariff on all Philippine goods imposed by US President Donald Trump is expected to weigh on the country’s exports and economic growth, according to economists.

While the Philippines is less exposed than other economies in the region, Bank of the Philippine Islands (BPI) lead economist Jun Neri said the tariffs could still dampen industrial output and slow gross domestic product (GDP) growth.

“The newly imposed tariff is expected to raise costs for Philippine exporters, making their products less competitive in the US market. Key sectors likely to be affected include electronics and agricultural products,” Neri said.

The US accounted for nearly 17 percent of Philippine exports in 2024. BPI estimates that the new tariffs could cause Philippine export growth to swing to a 4.2 -percent contraction this year, from the previously projected 6.1-percent expansion.

Industrial production may also slow by as much as 1.7 percent, reflecting the disruption to supply chains and the negative knock-on effects from reduced trade with the US.

Imports may also see a sharp slowdown, growing to just one percent from the initially expected seven-percent growth this year. This slowdown will likely result from the need to adjust to the sale of tangible products abroad.

Lower demand for exports and weaker industrial output could lead to a 0.5-percent reduction in the country’s GDP growth, Neri said.

But the Philippines’ domestic-driven economy offers some cushion.

With household consumption making up 75 percent of GDP and trade with the US only contributing about one percent, the country is better positioned to absorb external shocks compared to Vietnam, which was hit with a 46-percent tariff.

However, Neri said the peso could face volatility as investors assess trade uncertainties, which could drive up import costs.

In a worse-case scenario, if inflation threatens to breach the four-percent target, the Bangko Sentral ng Pilipinas (BSP) may be forced to limit rate cuts to just 25 basis points this year.

“A weaker peso could push up import costs, adding to inflationary pressures. This, in turn, may limit the BSP’s ability to cut interest rates aggressively, as maintaining market stability could take priority,” Neri said.

On the flip side, the Philippines could see some indirect benefits. Weaker global demand may put downward pressure on oil prices, helping ease import costs.

Chinese exporters facing higher US tariffs may also redirect goods to markets like the Philippines, potentially stabilizing inflation.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said Philippine exports to the US would become 17 percent more expensive.

“This could still lead to slower demand for Philippine exports to the US that, in turn, could lead to slower overall Philippine economic growth,” Ricafort said.

However, the economist sees limited drag on the country’s GDP growth “as the Philippine economy is less reliant on exports as a source of economic growth.”

According to Ricafort, Philippine merchandise exports are three to five times lower compared to major ASEAN countries on a yearly basis.

He added that slower Philippine economic growth would support further local policy rate cuts.

“Thus, slower global and local economic/GDP growth would also lead to slower sales and earnings for some listed companies,” Ricafort said.