Trump's 19% tariff on Philippine imports: What it means for Manila

Manila: The United States and the Philippines have reached a new trade agreement on July 22, 2025.

It's a significant deal: now, the US will impose a 19% tariff on imports from the Philippines, notably electronics. 

In exchange, certain US goods will get “zero” or significantly reduced tariffs when exported to the Philippines. 

The deal looks skewed, but there's more to it (than meets the eye). Here's what you need to know:

The deal was finalised on Tuesday during President Donald Trump's meeting with Philippine President Ferdinand "Bongbong" (BBM) Marcos Jr at the White House.

The Philippines has long enjoyed “duty-free access” to the US market under the Generalised System of Preferences (GSP) which granted zero tariffs on many products (GSP lapsed in December 2020).

In 2024, the Philippines exported $12.12 billion worth of goods to America, according to Philippine Congress data, while US exports to the Philippines were approximately $9.3 billion, a slight 0.4% rise from the previous year. 

Until 2025, the Philippines enjoyed a most-favoured nation (MFN) status in the US. 

The US, for its part, has tolerated a high-tariff and convoluted Customs charges and duties slapped on its exports to the Philippines, making US goods uncompetitive, especially versus products from neigbouring Asian nations.

Manila's protectionist trade policy vis-a-vis its major ally has posed a major challenge in US manufacturers trying to break through the local Philippine market.

This is why the Trump-Marcos Jr tariff negotiations has been dubbed a "game-changer".

For US manufacturers, it would make their products more affordable and more widely available in the Philippine market, competing directly with goods made in Japan and China, for example.

19% tariff: All goods imported from the Philippines into the US will face a 19% tariff — higher than the 17% rate previously discussed but lower than the threatened 20%.

Zero tariffs for US goods: In return, the Philippines agreed to remove or lower tariffs on select US products, notably in the automotive sector, and committed to buying more American soy, wheat, and pharmaceuticals.

Strategic cooperation: The agreement is also tied to broader military and security cooperation, aligning with both nations’ interests in the Indo-Pacific region amid tensions with China.

For the Philippines

Reduced export competitiveness: The 19% tariff will make Philippine goods — such as electronics, furniture, textiles, and agricultural products — less competitive in the US market, likely reducing export volumes.

Trade deficit impact: The US is a significant partner, importing $14.2 billion in goods from the Philippines in the previous year (2024), with the new tariff expected to put downward pressure on these figures and potentially increase the trade deficit for Manila.

Pressure on local industries: As US imports become cheaper in the Philippines due to reduced tariffs, local manufacturers could face stiffer competition. This could drive some to innovate or improve efficiency, but may also risk the survival of less competitive domestic industries.

For the United States

Zero tariffs for exports: US exporters stand to benefit from “open access” to Philippine markets, particularly in automobiles, agricultural products, and pharmaceuticals — potentially increasing US sales in the Philippines.

Cheaper Philippine imports lose appeal: With higher tariffs, US companies and consumers are likely to shift away from Philippine goods, especially in sectors such as automotive parts and textiles.

Inflation concerns: The increased cost of imported Philippine goods could push up prices for US businesses reliant on Filipino supply chains, though the US government argues that the overall impact on inflation remains uncertain.

Before the Trump-Marcos Jr. tariff deal, the Philippines imposed high tariffs on US goods, including automotive products. The computations of these tariffs were tangled in bureaucratic mumbo-jumbo.

Moreover, individual owners who wish to import US-made goods to the Philippines, even for personal use, have completely shunned the idea of doing so, as they are dingged on many sides, especially at Manila’s Customs.

President Marcos Jr. confirmed that as part of the deal, the Philippines will finally “open” the automotive market by granting zero tariffs on US-made cars.

This is a major shift from the previous tariff regime.

For US automotive products and heavy equipment, it could mean they can now compete directly with Asian (i.e. Chinese, Japanese, Asean) makers.

Prior to this “open market” status, Philippine tariffs varied widely by product category, but automotive products in particular were subjected to significant tariffs.

The new deal’s zero tariff on these US-made vehicles represents a notable concession. 

In so doing, President Marcos Jr has found a way to partly solve the perceived corruption issue at Philippines’ Bureau of Customs (BOC).

The Philippine tariff regime has for years amounted to high protectionist walls, used effectively by certain local Customs bureaucrats to shake down importers and traders.

Fact: Between 2023 and 2024, about 120 BOC employees were investigated for alleged corruption, as per local media reports.

In addition, many were administratively charged — 14 were placed on preventive suspension and 6 suspended — while the agency filed 135 criminal cases for illegal activities such as smuggling and fraud.

This amounts to a quiet victory for the Marcos administration.

The BOC has historically been regarded as one of the most corruption-prone government agencies due to persistent issues with graft, smuggling, and irregularities in Customs processes.

As part of an intensified internal crackdown, Philippine authorities have secured 25 criminal convictions against Customs officials since 2023, according to BOC data (though it's not immediately clear what happened to the BOC officials convicted of wrongdoing).

Deepening of military ties: The agreement is situated within a context of enhanced military cooperation, with both leaders reaffirming commitments to mutual defense and regional security amid rising tensions with China.

Regional trade competition: The Philippines’ 19% tariff rate is below Vietnam's 20% rate but higher than Singapore’s 10%. This shows the competitive pressures among Southeast Asian countries negotiating with the US.

The US-Philippines tariff deal marks a seismic shift in bilateral trade, with the US adopting one of its highest tariff rates for Filipino goods in modern history, while American products gain improved access to the Philippine market. 

The economic toll will likely fall hardest on some of the Philippine exporters and manufacturers.

On the flipside, Filipino consumers may benefit from cheaper US imports, assuming the local government implements effective support measures. 

Strategically, the deal strengthens military and economic ties against the backdrop of growing regional competition and security concerns in the South China Sea.

The 19% US tariff is set to significantly weaken the Philippine export sector in the American market. 

Given this development, the long-term viability of export-focused investments in the Philippines may weaken if the US market becomes less accessible, potentially discouraging new foreign direct investment in manufacturing and related sectors.

Meanwhile, export-oriented Philippine industries that rely on the US market could face prolonged declines in orders, resulting in job losses and reduced income for workers in affected sectors.

Lower US-bound exports may also widen the Philippines’ trade deficit, creating fresh macroeconomic challenges.

While some dynamic and high-value segments may retain a foothold, the lost market share and employment challenges, on one hand – may provide an impetus for renewed focus on diversification, industry innovation and lowering the cost of manufacturing inputs (like making power rates cheaper).

These pressures could reshape the structure of Philippine exports not just to the US, but globally, as firms and policymakers seek to adapt to a more challenging international trading environment.