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Manila Bulletin devider Business devider Trade & Industry devider Philippine MSMEs cut prices to survive 2025 US tariff shock—ADB paper

Philippine MSMEs cut prices to survive 2025 US tariff shock—ADB paper

Published Feb 26, 2026 06:15 pm  |  Updated Feb 26, 2026 01:28 pm
In the Philippines, micro, small, and medium enterprises (MSMEs) are the backbone of the economy, creating millions of jobs. But these vital businesses face hurdles from technological gaps to limited access to training.
In the Philippines, micro, small, and medium enterprises (MSMEs) are the backbone of the economy, creating millions of jobs. But these vital businesses face hurdles from technological gaps to limited access to training.

Micro, small, and medium enterprises (MSMEs) in the Philippines slashed their export prices more sharply than larger firms to cope with the 2025 United States (US) tariff increases, helping them stay in the US market despite rising competitive pressures, according to an economics working paper published by the Manila-based Asian Development Bank (ADB).

Titled “Impact of the 2025 United States Tariffs on Firm Export Behavior: Evidence from Asian Customs Data” and authored by Ritsuko Iseki, Daisuke Miyakawa, and Shigehiro Shinozaki, the paper found that Philippine MSMEs implemented “more uniform and deeper price cuts” in response to the initial 10-percent reciprocal tariff imposed by the US in April 2025, following US President Donald Trump’s “Liberation Day” announcement.

These cuts were steeper than those made by larger firms, which were able to adjust prices more selectively based on product demand elasticity, according to the paper published on Thursday, Feb. 26.

Researchers said MSMEs likely reduced prices across the board to protect their relationships with US buyers and avoid the costly process of re-entering the market later.

Because of these aggressive pricing strategies, Philippine MSMEs showed lower exit rates from the US export market in the short term—even though their market access “weakened for easily substituted products,” meaning those where US buyers could readily switch suppliers.

In contrast, larger firms maintained market presence through more strategic, product-specific adjustments and faced less pressure to cut prices deeply.

While MSMEs stayed in the market, the study warned that these decisions came at the expense of profitability.

The authors noted that the uniform and significant price cuts “substantially compressed margins” among smaller exporters.

MSMEs’ limited financial buffers and weaker bargaining power made them more vulnerable to tariff shocks, especially in highly competitive product categories, they added.

The paper highlighted that smaller exporters play a crucial role in Asia’s trade landscape and may require targeted support when major trading partners impose sudden policy changes.

Measures such as expanding trade finance access and improving knowledge of trade agreements could help mitigate future shocks, according to the paper.

The paper’s findings were based on export customs data to the US from six Asian countries, including the Philippines, covering January 2024 to mid-2025.

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