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.