WHEN US PRESIDENT Donald J. Trump set a 19% tariff on exports from the Philippines last July, its key body representing foreign buyers of apparel including Walmart, Inc. and Neiman Marcus Group LLC pledged to shift gear and focus on other destinations such as the Middle East and Europe.
Six months on, it鈥檚 becoming evident how difficult that transition will be to make.
For the Foreign Buyers Association of the Philippines, the US remains a critical market, accounting for 80% to 85% of its business, despite a push to move up the value chain and branch into new geographies.
Garment sales to overseas buyers are expected to hit $1 billion this year, largely in line with 2025, because other nations can鈥檛 rival US demand.
鈥淲e鈥檙e exploring other markets that could pay better,鈥 association head Robert Young said in an interview. 鈥淭hey鈥檙e interested, however, the volume, they cannot match the US. In the export business, you have to have volume.鈥
Long-standing relationships built over decades with US clients have helped to soften the blow, however. Mr. Young said several large US buyers have agreed to either fully shoulder the 19% levy or at least share the load 50:50, but those agreements aren鈥檛 necessarily permanent.
With higher input costs like power, logistics and labor making clothes made in the Philippines about 15% more costly than in places like Vietnam, India and China, Mr. Young said his group is working with manufacturers to move away from mass produced, lower-end garments.
The Philippines has 鈥渁bout the third most-expensive labor costs in ASEAN (Association of Southeast Asian Nations). In power costs, we鈥檙e one of the highest,鈥 Mr. Young said. 鈥淎lso, our productivity is becoming lower and lower due to other countries being mechanized. We don鈥檛 have the machines due to a lack of capital. Those things can be solved by the government, but there鈥檚 a little bit of neglect.鈥
Most large-scale textile mills in the nation closed years ago due to high operational costs and Mr. Young said there isn鈥檛 enough political will from Philippine President Ferdinand R. Marcos, Jr.鈥檚 government to reinvest in the sector.
Garment factories have been going out of business too. At the end of last year, Charter Link Clark, Inc., a supplier for Lululemon Athletica, Inc. operating in the Clark Freeport Zone north of Manila, closed its doors, laying off about 500 workers.
Sourcing denim from China and South Korea, and cotton from India, Pakistan and Turkey, the Foreign Buyers Association is encouraging factories to lean into clothes with greater detailing and higher-end finishes, like hand embroidery and beading, to boost margins and reach new buyers.
鈥淲e used to be very strong, selling jogging pants, sportswear in Canada and the US,鈥 Mr. Young said. 鈥淣ot anymore. We can only sell those things with higher, more elaborate trends.鈥
To that end, an export arm of the government last month converted a sprawling former trade center complex into the Likhang Filipino Exhibition Halls 鈥 six curated galleries, with each dedicated to product categories like fashion and textiles, furniture and lighting, home d茅cor and traditional arts.
Meant as a permanent showroom and marketplace to showcase Filipino products and host international buyers, the space opened on Jan. 20 but had few visitors on a recent weekday.
鈥淭his is good, at least this is something,鈥 Mr. Young said in a hall laid out with lounge room furniture and lights. 鈥淏ut it鈥檚 not enough. No matter how many showcases you build, it鈥檚 infrastructure and the ease of doing business that you have to attend to.鈥 鈥 Bloomberg News
