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Early Thursday morning Manila time, U.S. President Donald Trump sent a letter to President Ferdinand «Bongbong» Marcos Jr., notifying him that despite previous negotiations to reduce the initially announced 17% tariff in April, Washington would impose a 20% tariff on all Philippine goods exported to the U.S. starting August 1, 2025.
In the letter, which was sent to multiple countries—with only the country name and tariff rate varying—Trump cited the «significant trade deficit» between the U.S. and the Philippines, stating, «We must move away from this long-standing and very persistent trade deficit caused by the Philippines’ tariff and non-tariff policies and trade barriers.»
According to U.S. Trade Representative data, U.S.-Philippines goods trade in 2024 totaled $23.5 billion.
U.S. exports to Manila amounted to $9.3 billion, while imports reached $14.2 billion, resulting in a $4.9 billion trade deficit with the Philippines in 2024—a 21.8% increase from the previous year.
Nevertheless, Trump told Marcos that «the 20% figure is far lower than what is needed to eliminate the trade deficit we have with your country.»
The U.S. leader has repeatedly criticized what he calls «extremely unbalanced» trade relations between America and its partners.
This prompted him to announce a broad reciprocal tariff policy in early April targeting over 100 countries, including the Philippines. Initially, tariffs were to be suspended for 90 days to allow negotiations for more favorable rates.
The 90-day suspension expired on July 8.
In May, a Philippine delegation met with U.S. Trade Representative Jamieson Greer to discuss «mutually beneficial ways to strengthen bilateral relations» amid the 17% tariff imposed by the U.S.
Despite these initial efforts, Manila’s trade and investment ministers were caught off guard by Trump’s decision to raise the reciprocal tariff rate for the Philippines by three percentage points.
One official expressed optimism that the country could still secure a free trade agreement (FTA) with the U.S.
Who is most affected?
Unsurprisingly, Philippine exporters bear the brunt of Trump’s trade measures.
Data from the Philippine Statistics Authority (PSA) shows that in 2024, the U.S. was the country’s top export destination, accounting for 16.6% or $12.14 billion of total export revenues ($73.27 billion).
«A 20% export tax will hit Philippine exporters hardest, as the U.S. is their largest market, making up 17% of total exports. This could slow demand for Philippine goods, indirectly dampening overall economic growth,» said an economist.
Another industry leader noted that while a 17% or 20% tariff might seem «normal,» the bigger issue is Vietnam’s lower revised rate compared to its initially announced 46%.
«We initially expected manufacturers to relocate to the Philippines at a 17% rate, but they haven’t. Even at 17%, competing with Vietnam is tough,» he said.
However, one analyst argued that the 20% tariff would have «limited impact on Philippine GDP, as the economy is less export-driven compared to other ASEAN nations.»
«Philippine goods exports are three to five times lower than major ASEAN economies annually,» he noted, adding that global protectionist responses to Trump’s policies could also indirectly affect the Philippines.
A researcher warned that tariff risks could undermine export competitiveness, especially as regional markets negotiate tax exemptions or preferential terms.
«Exporters face pricing and margin pressures, making Philippine goods less competitive unless non-price factors like logistics, quality, and service improve. But there’s an opportunity—if exporters act fast, they could attract orders from countries facing higher tariffs, provided there’s swift adaptation and policy support,» he said.
A labor group urged ASEAN to deepen regional solidarity, not just as a geopolitical bloc but as a cohesive economic community capable of defending collective interests.
«We must rebalance trade relations, especially with nations that respect sovereign development paths and don’t use trade as
