PH seen taking bigger hit from US tariffs than Indonesia
The new US tariffs could hurt the Philippine economy more than Indonesia’s, even though both face a 19-percent import tax, as Manila’s earlier edge may have been erased by President Donald Trump’s higher-than-expected tariff announcement.
In a report, Nomura Global Markets Research estimated the new US tariff on Philippine exports could shave 0.4 percentage point (ppt) off the country’s gross domestic product (GDP) growth, double the 0.2 percentage point economic hit projected for Indonesia.
Nomura called the impact on the Philippines “substantial,” as its baseline GDP growth forecast of 5.3 percent for 2025 already falls short of the Marcos administration’s target of 5.5 to 6.5 percent.
The Japanese investment bank said it had initially expected the tax rate on Filipino goods coming to America to be reduced to 10 percent “on the assumption that the Philippines is a strong ally of the US and is not a third country for transshipments.”
Higher level
“As it turns out, despite the visit to Washington DC by President Marcos and both sides reiterating the need for a strong partnership, the tariff was still set at 19 percent, which is even higher than the ‘Liberation Day’ level of 17 percent,” Nomura wrote.
After a bilateral meeting with Trump in Washington, Mr. Marcos said the Philippines agreed to scrap tariffs on American automobiles and boost imports of US soybeans, wheat and pharmaceutical products.
Asked whether the Philippines got the short end of the stick, the President said, “Well, that’s how negotiations go.”
In a separate analysis, Gareth Leather, senior Asia economist at London-based Capital Economics, said the outcome of Manila-Washington trade talks just proved that “the strength of each country’s negotiating hand appears to have little bearing on the terms that Trump says have been agreed.”
“All of this adds to the sense that most countries in Asia will end up facing tariffs of 15 to 20 percent,” Leather said.
“That said, comments from Filipino officials following the announcement of its trade deal reinforce the idea that any agreed tariffs aren’t necessarily the end point,” he added.
While the Philippines may suffer a larger GDP hit, Nomura flagged parts of Indonesia’s trade deal with Trump that could carry “other potentially negative effects”—particularly Jakarta’s agreement to buy relatively large volumes of American goods.
This, the bank explained, “will increase imports and therefore pose an additional drag on [Indonesia’s] growth and the twin deficits.”
“We think the tariff rates set by the US for Indonesia and the Philippines at 19 percent are fairly high and therefore pose downside risks to their respective growth outlooks,” Nomura said.
