Rethinking trade: why unequal tariff terms hurt Philippine local industries

Can one country’s economic policy shake the foundation of a decades-long trade relationship? And who really pays the price, local industries in the Philippines or consumers in the United States?

Globalization emerged after World War II as a way to rebuild economies, prevent future conflicts, and boost prosperity by connecting nations through trade. It led to the creation of global supply chains, lowered the cost of goods, and increased market access for developing nations like the Philippines. But in recent years, protectionist policies have started to challenge that vision. One notable move: the 19% tariff imposed during the Trump administration on goods from the Philippines.

For young professionals and the youth, understanding these developments is crucial. These policies don’t just affect industries—they influence job opportunities, product prices, and the overall direction of the country’s economy both now and in the years to come.

So, what are the ripple effects of this policy?

Here are five key impacts on the Philippines, the U.S., consumers, inflation, international relationships, and the search for new trade partners:

1. The Philippines: local industries face increased pressure

The 19% tariff makes Philippine products more expensive in the U.S. market, affecting key sectors such as electronics, garments, and agriculture. Local industries—many of which rely heavily on the American market—may experience reduced demand, forcing them to cut costs, delay investments, or scale down operations. This could lead to job losses and dampen the country's overall economic momentum.It’s like trying to sell mangoes at a premium in a market flooded with cheaper fruit—no matter the quality or uniqueness, practicality drives consumers to choose the more affordable option.

2. The U.S.: consumers carry the cost

While tariffs are intended to protect domestic production in the U.S., they often end up hitting consumers the hardest. American households may feel the pinch through more expensive Filipino goods—ranging from canned food to auto components and outsourced services. It’s like placing a toll booth on a once-free highway: the extra cost doesn’t just slow down trade, it makes the journey more expensive for everyone. Over time, this leads to reduced consumer choice and diminished purchasing power.

3. Inflation could rise in both economies

Tariffs create friction in global trade. For Filipino exporters, they mean lower revenues and higher costs, some of which may be passed on to local buyers. In the U.S., importers may raise prices, adding to inflation.

Since the U.S. has imposed tariffs on multiple countries, affected nations like the Philippines should strengthen trade ties with one another.

It’s like getting overcharged at your usual store, so you start shopping elsewhere with friends who offer better deals. This shift can help cushion inflation and reduce overdependence on one dominant market.

4. Trading on uneven ground

The Philippines currently imposes a 0% tariff on many U.S. imports, giving American products easy and open access to the local market. In contrast, a 19% tariff on Philippine exports to the U.S. creates a clear imbalance. This setup is increasingly unfair to local industries trying to stay competitive. The disparity highlights the need for the Philippines to reassess its trade policy and actively seek partnerships with countries that offer fairer or zero-tariff agreements. Building ties with more equitable trade partners can help local industries grow and reduce the country’s vulnerability to one-sided policies.

5. Strengthening trade links with ASEAN, China and key allies

As the Philippines reevaluates its trade relationships, attention may shift toward regional partners offering more balanced terms. With the U.S. becoming a more difficult market to navigate, the country may strengthen its ties with Asia-Pacific economies through established trade agreements. ASEAN has long maintained free trade agreements with China (ACFTA), South Korea (AKFTA), Japan (AJCEP), India (AIFTA), and Australia and New Zealand (AANZFTA). These partnerships laid the foundation for the Regional Comprehensive Economic Partnership (RCEP), now the largest trade bloc in the world by population and combined GDP.

By participating more actively in these regional trade frameworks, the Philippines can diversify its trade portfolio, reduce reliance on any single market, and create fairer, more stable economic partnerships. For instance, China offers 0% tariffs on many goods traded within the ASEAN-China Free Trade Area (ACFTA), presenting an accessible and competitive option for Philippine exports. Trade with China, ASEAN, and neighboring countries also provides better outcomes for local industries, retailers, and consumers, as goods remain more stable in supply and more affordable in price.

Beyond the region, expanding trade relationships with Saudi Arabia, the wider Middle East, Central Asia, and Russia can also bring strategic advantages. These markets present strong demand for agricultural products, construction materials, and skilled labor, while offering competitive pricing on energy and raw materials that benefit local production. Deepening ties with these economies can help the Philippines unlock new opportunities, access untapped markets, and reduce exposure to one-sided trade dynamics—supporting both economic resilience and the long-term growth of local industries.

Strengthening ties within these agreements supports the growth of local industries by opening up markets that offer reciprocal benefits. Over time, this shift may also help shape the Philippines' long-term economic direction and reinforce its strategic position within the region.

Protectionism is the institutionalization of economic failure. - Edward Heath

Learning together, we can uncover how global trade impacts local industries—and how we can support them. Facebook: Neil Gregori Garen.