Philippines seeks zero tariffs on key exports amid looming U.S. trade hikes

The Philippine government is actively negotiating with the United States to secure zero tariffs on select export products, aiming to shield key industries from a pending tariff hike and strengthen long-term trade and investment ties.

Finance Secretary Ralph Recto confirmed that discussions are underway to remove duties on a targeted list of Philippine exports, in response to U.S. President Donald Trump's announcement earlier this month of a 20-percent tariff on goods from the Philippines, set to take effect on August 1.

“Definitely not for all products, but we have identified a set of products [for tariff removal],” Recto told reporters last week. “We want to reduce whatever duties they impose on our products.”

In 2024, the Philippines posted a $5-billion trade surplus with the U.S., a figure Recto said bolsters the country’s negotiating position. U.S. data shows total merchandise trade between the two nations amounted to $23.5 billion last year, with American imports from the Philippines at $14.2 billion, against $9.3 billion in exports.

Recto also underscored the strategic dimension of Philippine-U.S. ties, noting that the two countries’ defense and economic cooperation could work in Manila’s favor during negotiations.

“I think our relationship with the U.S. is not only trade, but also security,” he said, describing the tariff hike as part of Washington’s “negotiating posture.”

The issue is expected to be raised in an upcoming meeting between President Ferdinand Marcos Jr. and President Trump, as officials seek to finalize a trade arrangement before the new rates are implemented.

Beyond tariff relief, Recto reiterated the Philippines' broader goal of securing a free trade agreement (FTA) with the U.S. and other partners, including the European Union. “More trade should be done. We have to expand our markets [and] get more investments in manufacturing so that we can export more,” he said.

Meanwhile, Fitch Solutions' BMI research unit expressed cautious optimism that the Philippines could still secure favorable terms. Asia country risk head Darren Tay said the country benefits from relatively low current tariff exposure and strong leverage through its defense cooperation with the U.S.

“Defense spending will emerge as a point of contention in the proceedings,” Tay noted, suggesting that the Philippines could use a promise to increase its military budget as a bargaining chip.

While Trump's tariff hike lacks a formal justification, Tay believes the Philippines remains “relatively insulated” given its export structure and the fact that nearly half of its U.S.-bound exports come from services, particularly the business process outsourcing sector, which are not subject to tariffs.

BMI’s base-case scenario sees the reciprocal tariff rate settling at around 10 percent. Even under a worst-case projection of a 20-percent rate across more sectors, Tay said the Philippines is unlikely to suffer severe disadvantages, with many of its key exports falling outside highly taxed categories.

With negotiations ongoing and both economic and security ties in play, Philippine officials are pushing to protect local industries while laying the groundwork for deeper trade relations with one of its top economic partners.