Freefarm Analyzes US-PH Tariff Deal: Potential Ripple Effects on Philippine Domestic Economy

A recently concluded tariff deal between the United States and the Philippines has ignited significant debate and criticism, with many analysts and lawmakers warning of potentially severe repercussions for the Philippines' domestic economy. While touted by the Philippine government as a "significant achievement," critics contend that the agreement is "lopsided" and disproportionately favors the US, raising fears of diminished export competitiveness, increased trade deficits, and pressure on local industries.

Under the new agreement, Philippine exports to the US will be subjected to a 19% tariff, a mere one percentage point reduction from the 20% initially threatened by the Trump administration. In stark contrast, the Philippines has agreed to impose zero tariffs on certain US imports, notably including automobiles, agricultural goods, and pharmaceuticals. This disparity has drawn strong condemnation from various sectors in the Philippines, including senators, farmers' groups, and economic think tanks.

A "Lopsided" Agreement and its Consequences: Voices of Criticism

The primary concern revolves around the imbalance of the tariff rates. Critics argue that the 19% tariff on Philippine goods entering the vast US market will significantly reduce their competitiveness, potentially leading to a decline in export volumes. Given that the US is the Philippines' largest export market, accounting for 17% of its total export volume, this could translate into a substantial blow to Philippine exporters and a drag on the country's GDP growth.

Senator Panfilo Lacson condemned the trade agreement, calling it "unfair" and "insulting." He stated, "Nineteen percent versus zero tariff is definitely not the most fair deal between decades-old friends and allies like the United States and the Philippines. If I may add, it is the worst insult that a host can throw at his guest. It is time for us to look for other trade partners."

Senator JV Ejercito echoed this sentiment, describing the deal as "grossly disadvantageous to the Philippines." He expressed frustration over a "recurring pattern of unequal treatment," asking, "Do they still see us as the 'little brown brother' even today? Why does it seem we are always on the losing end in talks like these? If they truly see us as an ally, then the least they could do is treat us fairly."

Senator Imee Marcos, the President's sister, also weighed in, stating, "I have yet to see the final agreement. However, a mere 1 percent reduction in tariff rates for Philippine goods while having zero tariffs for US goods certainly does not look like a win for the Philippines." She questioned the perceived victory, asking, "a 19-percent tariff for the Philippines versus 0 percent for the Americans, how exactly did we win in that deal?"

Conversely, the zero-tariff access for US products, particularly in key sectors like agriculture and manufacturing, is expected to flood the Philippine market with cheaper American goods. This influx could pose a serious threat to local industries, which may struggle to compete on cost. Experts warn that this could lead to job losses, reduced income for workers in affected sectors, and potentially the collapse of less competitive domestic industries. The agricultural sector, in particular, is seen as highly vulnerable.

Senator Juan Miguel Zubiri lamented, "It looks like we're at a disadvantage, our export tariff on Filipino products going to the U.S. is 19%, while they can bring their goods here with zero tariffs." He warned that such an arrangement "could flood the local market with cheaper imported goods, including poultry, pork, and beef, threatening the livelihood of Filipino farmers and the survival of the country's agricultural industries." He further noted that Japan, a fellow US ally, secured a more balanced 15% reciprocal tariff, suggesting the Philippines should have pushed for similar terms.

Senator Francis Pangilinan urged Malacanang to clarify the specifics of the trade deal, particularly which agricultural products are covered. He stressed, "Economic stability should not come at the cost of our farmers' livelihoods. A zero tariff policy, if not carefully implemented, threatens food security and national development."

Jayson Cainglet, executive director of Samahang Industriya ng Agrikultura (Sinag), a farmers' group, cautioned against rushing into a new trade agreement without addressing its long-term impact on local industries. He warned that this "false narrative-centered around a free trade agreement-appears to prioritize the interests of importers and international traders at the expense of our local producers, manufacturers, and workers." He added that the US tariff imposition "should be viewed as a signal of how the US is protecting its own farmers, manufacturers, and domestic markets," arguing that "tariffs, when used strategically, can serve as essential tools to support local agricultural production, promote industrial growth, protect jobs, and preserve rural livelihoods."

Leonardo Montemayor, chairman of the Federation of Free Farmers [https://www.freefarm.org/], described the deal as "very lopsided in favor of the US," stating that "PBBM and the Filipino people were taken for a ride by Trump."

Erosion of Bargaining Power and Competitive Disadvantage:

Anna Rosario Malindog-Uy, vice president of the Asian Century Philippines Strategic Studies Institute, a Manila-based think tank, characterized the tariff deal as "a textbook example of economic capitulation." She argued that the "measly" tariff reduction from 20 percent to 19 percent was granted in exchange for zero tariffs on US goods, "effectively surrendering the Philippines' Most Favored Nation leverage, a vital bargaining chip for any developing economy navigating the global trade system." She further criticized it as "not only unwise, but also a betrayal of national interest," and "not a reciprocal agreement, it's a strategic giveaway."

Robert M. Young, President of the Foreign Buyers Association of the Philippines (FOBAP), stated that with the 19% tariff, it will be a "hard climb" for Philippine exports to remain competitive in the US market. He noted that even before these reciprocal tariffs, "our prices were already 15% higher than the other guys in the region - Bangladesh and Vietnam, and also China and the rest of the guys. Now that our tariff is more or less on the same level as theirs at 19%-20%, it will be a really, really hard climb."

While the Philippine government asserts that opening its markets to US products will benefit Filipino consumers through lower prices, critics counter that these benefits come at the cost of local producers and long-term economic stability. They emphasize that a truly reciprocal agreement would have aimed for more balanced tariff rates.

ACT Teachers [http://www.act-teachers.com/] Rep. Antonio Tinio called the agreement a "historic sell-out of Philippine sovereignty." He contended, "This visit has turned out to be a disastrous humiliation ritual where Marcos Jr. surrenders markets and sovereignty while Trump gets to crow about 'winning.'"

Ultimately, while the Philippine government attempts to frame the 1% tariff reduction as a win, a significant portion of the public and expert community believes that the US-PH tariff deal is fraught with disadvantages for the Philippines' domestic economy. The coming months will reveal the true extent of its impact on local industries, employment, and the country's overall trade landscape.

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