State-run think tank Philippine Institute for Development Studies (PIDS) said the Philippines must improve the competitiveness of its domestic industries to shield itself from the impact of the higher tariffs to be imposed by the United States (US) starting this August, given an “inferior” trade deal that Manila secured with Washington.

PIDS emeritus research fellow Josef T. Yap and senior research fellow Francis Mark A. Quimba said in an Aug. 4 policy note titled “The Trump Tariff Plan and the Philippine Deal” that the Philippines can pursue a strategic approach to deal with the uncertainty caused by US President Donald Trump’s tariff spree.

In particular, the government should address bottlenecks in trade support services so that Philippine exports would incur lower non-tariff costs, according to PIDS.

Additionally, PIDS said it is important to ensure that homegrown businesses and manufacturers are able to maximize the benefits coming from the Philippines’ existing free-trade agreements (FTAs).

PIDS also mentioned the need to take advantage of cheaper imports from the US, including manufacturing inputs, which the think tank noted can be utilized to widen the country’s manufacturing product space.

To navigate uncertainty in US trade policy, the Philippines should strengthen regional coalitions like the Association of Southeast Asian Nations (ASEAN) for coordinated responses, build alternative trade frameworks to reduce reliance on US-dominated systems, and assert a consistent reputation in repeated negotiations to discourage unfair demands, PIDS said.

PIDS lamented that “based on various metrics, the Philippine tariff deal with the US is inferior to the US trade agreements secured by Indonesia and Vietnam.”

“It reflects a general pattern in which the Philippines has not significantly benefited from its special relationship with the US,” the think tank said.

To recall, President Ferdinand Marcos Jr. last month struck a deal in Washington to slightly lower US tariffs on Philippine-made goods to 19 percent from the 20 percent threatened by Trump.

During his “Liberation Day” announcement last April, Trump wanted to impose a reciprocal tariff of 17 percent on the Philippines, lower than the rate that was agreed upon with Marcos.

“Earlier analysis and pronouncements make it evident that Trump thrives in chaos and uncertainty because it creates asymmetric opportunities for someone willing to operate outside conventional frameworks. The challenge for the Philippines is developing a blueprint that does not simply react to Trump’s unpredictability but actually neutralizes it,” PIDS said.

For PIDS, “the Trump Tariff Plan (TTP) is fundamentally flawed, as its stated goals of raising revenue, reducing trade deficits, and encouraging reshoring are contradictory.”

“Moreover, the TTP applies a nonsensical formula to calculate the so-called reciprocal tariffs. The TTP is an extension of Trump’s proclivity to impose his version of reality, which has of often led to adverse outcomes,” PIDS added.

(Ricardo M. Austria)