Trump Tariffs and the Philippine auto market

No need to panic


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Over the weekend, new US President, Donald Trump, announced he would impose tariffs on goods from countries like Mexico, Canada and China. These were part of his long-promised economic policy during his campaign and were put into effect early this week.

Many experts and economists have argued that these may not achieve the desired effect, with many highlighting that American consumers will be bearing the brunt of this policy in the form of more expensive goods.

As much of the world is scrambling to comprehend how this new economic policy might affect their economies, no doubt you too are likely wondering how this could affect the Filipino buyer.

Over the course of this article, we’ll discuss how this will affect the Filipino car buyer and what you can expect to happen in the market in the coming months.

The ASEAN shield

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Perhaps the best news about this development is that the Philippine car market will be relatively insulated from the effects of this new American policy. This is because the Philippines is part of the Association of Southeast Asian Nations (ASEAN), wherein trade between member countries is strongly being encouraged. As a result, tariffs on vehicles coming from ASEAN member nations like Thailand, Indonesia, and Vietnam are kept to a minimum as opposed to vehicles from non-member nations.

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In addition, the Philippines also has existing free trade agreements (with certain conditions) with nations like Korea, Japan, and China. As a result, vehicles made in all these countries — which comprise a large majority of those on offer in showrooms — enjoy relatively low tariffs and will continue to be priced competitively. 

We’re mentioning this because the countries where these vehicles are manufactured will play a key role in the competitiveness of their pricing. In essence, if they are made in these countries —because of our existing free trade agreements — their prices will hardly be affected, if at all.

Ford

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The blue oval is perhaps the best performing American auto brand in the country. Ford has consistently been among the country’s top 10 brands since it returned to the country in 2004. That said, Ford’s top-selling models will remain largely unaffected by the new tariffs. This is because popular models like the Ranger and Everest are made in Thailand and benefit from our current free trade agreements. The Territory, by contrast, is made in China, but still benefits from a separate free trade agreement we have with the nation.

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Perhaps the only vehicles affected will be those manufactured in the US. In Ford’s lineup, these are the new Bronco, the Mustang, and the Explorer. The Philippines does not have a free trade agreement with the US when it comes to cars. As such, these vehicles are slapped with a certain amount of tax. In addition, there’s also a high shipping cost as these vehicles have to cross the Pacific Ocean to get into our market.

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Finally, these vehicles are definitely made with some components sourced from China, Canada, and Mexico. As such, we can expect to see some price increase as a result of the tariffs. Nonetheless, these are not high volume vehicles, and so Ford Philippines will easily weather this storm. However, it will weaken their position in the sports car and luxury SUV segments as their price increases will make it difficult to be competitive.

Chevrolet

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The bowtie brand is another one that may not feel that much of a pinch as a result of these new tariffs. The current Chevrolet lineup is composed mostly of crossover SUVs. Many of these vehicles are made in Korea and China. As a result of our free trade agreements with these nations, we likely won't see much a change in their price.

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Unfortunately, Chevrolet still does source a few vehicles from the US. These include the Tahoe, Suburban, and Corvette. Like with Ford, these vehicles also source components from their nearest neighbors, which are Mexico and Canada. As a result, these components will be slapped with a tariff, forcing the brand to increase the vehicle’s price, which we many inevitably pay for. That is, if you’re in the market for these large American SUVs or the C8 Corvette.

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As such, we can expect Chevrolet to publish some price increases, just for the American-made models. Unfortunately, they’re already quite expensive locally, with their prices comparable to luxury SUVs from Mercedes-Benz, BMW, and Lexus.

Stellantis

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Perhaps one brand that will definitely be hurting from this development is Stellantis, which counts Jeep, Dodge, Ram, and Chrysler among its subsidiaries. These brands, unfortunately, source their entire lineup from the US. 

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As such, expect prices of vehicles like the Jeep Wrangler, Gladiator, Grand Cherokee, and Ram pickup to increase. Chrysler, unfortunately, no longer offers any models locally. Dodge, meanwhile, is selling off its inventory of Challenger muscle cars. As such, fans of the Jeep or Ram will have to pony up if they want these vehicles as there’s no other location to source them from.

Tesla

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Quite surprisingly, Tesla cars in the Philippines will also be quite isolated from this development. Tesla may be an American brand, however, the cars sold by its official subsidiary in the Philippines are actually sourced from China. As such, those still on the fence of whether to buy a new Tesla need not rush as the price is not likely to increase any time soon. 

Motorcycles

Harley-Davidson shutting down operations in India

Perhaps other brands that may feel some pinch are American motorcycle and powersports brands. These include Harley-Davidson, Indian, Polaris, and Can-Am. 

Harley-Davidson will likely be least affected as it has already established a factory in Thailand some years back. As such, models like the Harley-Davidson Sportster S, Pan America, and Nightster will not see any change. What may be affected are models like the Fat Boy, Street Bob, Heritage Classic, and all its bagger models.

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Like Harley, Indian has also established a manufacturing bases in the ASEAN region. These include facilities in Thailand and Vietnam (through its parent company, Polaris). As such, some of its more affordable models, like the Scout, will not be affected, but the higher end cruisers likely will be. 

Powersports vehicles, like the Polaris RZR and Can-Am Maverick, as well as Can-Am’s three-wheel motorcycle, however could see some price adjustments.

Conclusion

Thanks to our location in the world and our pre-existing free trade agreements with several nations, the Philippine auto market will be fairly insulated from the effects of the Trump Tariffs. Granted, some American-made cars and motorcycles will likely see an increase in price. However, many of them are higher-end models which may be beyond most buyers’ budgets anyway. 

There is hope as hybrids and electric vehicles enjoy certain tax exemptions. As such, we might see these American brands opt to introduce new hybrids or EVs in an attempt to make up for the increase in other models. Majority of the top-selling, mass-market models will be relatively unaffected.