Philippine exports to the United States (US) continue to enjoy a competitive advantage over shipments from other countries despite the Trump administration's recent imposition of a 12.5 percent tariff, according to the Department of Trade and Industry (DTI).

“We're not in a bad situation, not at all,” Trade Undersecretary Ceferino Rodolfo said in a virtual briefing following the Office of the US Trade Representative's (USTR) announcement on Friday, July 24, that the Philippines is subject to a new tariff rate.

Based on a preliminary assessment of 2025 US import data, the DTI estimates that only 34 percent of the country's exports to the US are covered by the USTR's 12.5 percent duty.

It largely covers goods produced by labor-intensive industries, including leather and travel goods, apparel, footwear, and toys. Last year, exports of these products reached $6.25 billion.

Meanwhile, products exempt from the tariff include some of the country's top export commodities, such as electronic products, including semiconductors, automatic data processing machines, and integrated circuits.

Also exempt from the duty are agricultural goods such as bananas, mangoes, cocoa, and coconut products, as well as minerals, aircraft parts, and auto parts.

Combined, these exempted goods reached a total value of $11.98 billion last year, the DTI said.

Compared with neighboring countries, Rodolfo said tariff coverage on Philippine exports is smaller than that of Indonesia, where 83 percent of imports to the US are covered, and Malaysia, where coverage stands at 40 percent.

Both Indonesia and Malaysia are subject to the lower 10-percent tariff imposed by the USTR, as part of its investigation into the US' top 60 trading partners over their alleged failure to prevent imports produced with forced labor.

The Philippines was slapped with the higher 12.5-percent tariff after the USTR determined that the country “has failed to impose and effectively enforce a forced labor import prohibition.”

Still, Rodolfo noted that the Philippines may have already reached the "ceiling" of the USTR's tariff imposition since the country is not included in a separate investigation looking into structural excess capacity and production in manufacturing sectors, which may result in another round of duties.

Countries currently being probed by the USTR for excess capacity include Indonesia, Malaysia, Singapore, Vietnam, Thailand, and China, among others.

“12.5 percent seems to be our ceiling, while the 12.5 percent or 10 percent of the other countries are not,” said Rodolfo.

As such, Rodolfo said the government is actively engaging with the USTR to potentially reach an agreement that would lower or remove the tariffs currently imposed on Philippine imports.

“We are very much encouraged by the continued positive engagement of the US with respect to this particular issue, including the recent issuance by the Philippines of the JAO (joint administrative order),” he said.

A day before the USTR's tariff announcement last week, the DTI led the signing of a JAO that explicitly prohibits the entry of imported goods suspected or determined to have been produced, wholly or in part, through forced labor.

The order establishes an interagency committee tasked with investigating cases involving imports produced through forced labor, which would result in a corresponding ban to be implemented by the Bureau of Customs (BOC).

Rodolfo said the USTR has assured the DTI that the 12.5 percent tariff can "change at any time" based on its evaluation of the country's progress in prohibiting imports made with forced labor.

He noted that the response to the JAO has been positive so far and that it will be considered in the USTR's review of the tariff imposed on Philippine goods.

In fact, certain multilateral agencies and bilateral partners have already expressed their intent to provide funding to support the Philippines in implementing the JAO, he said.