Summary
- The Philippines will eliminate tariffs on U.S. goods
(“zero tariffs” on American imports). - Conversely, goods imported from the Philippines to the
U.S. will face a 19% tariff, slightly lower than the 20% originally
threatened and higher than the previously proposed 17% reciprocal rate. - The agreement was described as establishing “open
market” trade between the two countries. - In addition to trade, Trump highlighted plans for
military cooperation between the U.S. and the Philippines.
According to a Trump post on Truth Social, the
deal imposes 19% tariffs on goods originating from the Philippines, but it
exempts American goods shipped there from tariffs. This follows Tuesday’s White
House meeting between the two leaders.
“It was a beautiful visit, and we concluded our
Trade Deal,”
Trump wrote. However, it was not immediately apparent if the two
leaders formally signed anything. Similar to other recent trade agreement
announcements, few details were revealed.
Trump told reporters earlier Tuesday in the Oval Office that he was not prepared to
negotiate a trade agreement with Marcos because
“he’s negotiating too
tough.”
However, he stated that they will
“probably agree to
something.”
Given that Trump claims to have struck
agreements with other nations that demand lower tariff rates than the ones he
threatened to apply in April, the accord is a little out of the ordinary. Prior
to Trump pausing them, Philippine goods were subject to a minimum 17%
“reciprocal” tariff in April. He threatened to impose a 20% tariff on
Philippine imports starting on August 1st earlier this month.
The US Commerce Department reports that last
year, the US imported $14 billion worth of goods from the Philippines.
Computers and other gadgets, processed foods,
machinery, and clothing are among the top items sent from the location. In the
meantime, US exports of Filipino goods totaled $9 billion. Among the top items
the US delivered there were processed meals, computers, and other gadgets.
The news had little effect on stocks. The Dow
was up 0.26%, or 115 points. The tech-heavy Nasdaq fell 0.37%, while the
S&P 500 remained unchanged.
What are the implications of an open market but
with a 19% tariff?
An open market with a 19% tariff (as announced
in the U.S.-Philippines trade agreement) means that while goods can flow more
freely between the two countries, imports from the Philippines into the U.S.
will face a significant added cost.
A 19% tariff increases the cost of imported
Philippine products, making them more expensive for American consumers and
businesses, which may reduce demand for these goods.
Filipino exporters may lose market share in the
U.S. as consumers switch to cheaper domestic products or imports from countries
without or with lower tariffs.
The tariff might reduce Philippine export
volumes to the U.S., affecting the Philippines’ trade revenues from this
market.
