PHL exports not seen competitive at 17% US tariff rate after Vietnam deal

By Justine Irish D. Tabile, Reporter

EXPORTS from the Philippines will have difficulty competing if the US restores its 17% reciprocal tariff rate, particularly after Vietnam was granted a favorable trade deal last week, the Foreign Buyers Association of the Philippines (FOBAP) said.

FOBAP President Robert M. Young said Vietnam struck a deal with the US that lowered its tariff to 20% from the 46% originally announced in early April.

“Presuming we have the 17% tariff … the latest Vietnam-US deal will definitely hinder our chances of competing in a price war,” Mr. Young said via Viber.

“To start with, even prior to Trump’s reciprocal tariff, Vietnam had a 10-15% lower free on board selling price compared to the Philippines,” he added.

He said Vietnam’s pricing advantage is due to its 50% lower wages and modern infrastructure.

“Realistically, there’s no contest between us. However, as FOBAP has been advocating, we, with the government, must seriously exert all efforts to improve in order to remain on the radar of the foreign buyers,” he added.

However, he said if the Philippines retains its current 10% tariff, “it may give some elbow room, but it will still not be easy to beat Vietnam prices.”

“The best scenario, in our opinion, is the relocation of the Vietnamese and other countries’ manufacturers to Philippine soil,” he added.

Last week, US President Donald J. Trump announced that he will impose a “lower-than-promised” 20% tariff on Vietnamese goods.

Under the US-Vietnam deal, transshipped goods through Vietnam will be subject to a 40% tariff, Reuters reported.

Philippine Institute for Development Studies Emeritus Research Fellow Rafaelita M. Aldaba said Vietnam’s new tariff structure “is a significant reduction from the earlier tariff rate of 46% announced in April, reducing Vietnam’s trade exposure risk.”

“However, the full implications of this deal will remain uncertain until the detailed provisions are finalized,” she said via Viber.

“For the Philippines, this development underscores the need for a strategic response. As Vietnam intensifies efforts to upgrade its industrial base and shift toward higher-value exports such as semiconductors, the Philippines must act decisively,” she added.

She said the Philippines must invest in critical infrastructure, negotiate market access, and address sector-specific constraints.

“Strengthening our competitive position in priority industries is crucial to ensuring that the country can capitalize on emerging opportunities in the rapidly evolving global supply chain landscape,” she added.

Philippine Chamber of Commerce and Industry (PCCI) President Enunina V. Mangio cited the need “to revisit our supply chain, technology, and our processes. Because if we can automate to improve our processes and reduce our costs, probably that would minimize the impact of all these things.”

Speaking to reporters on Friday, she added: “All our economic managers are working very hard in addressing the impact of tariffs and the increase of prices. As a matter of fact, right now, I think they are trying to negotiate for a free trade agreement with the US to lessen the impact of the tariff increase.”

“Let us wait and see for the final rate that will be implemented and imposed on us. And if that happens, I think the business sector will be ready. We just have to make our operations very efficient to at least reduce our costs,” she added.

She said the PCCI is also hoping for a review of the cost of logistics, charges, and taxes as another way to mitigate the impact of the tariff.

US tariffs on most trading partners are subject to a 90-day pause since the reciprocal tariffs were first announced in early April. Pending the completion of talks with various trade delegations, the US is charging most imports 10%.