PEZA on US 17% tariff on PH: Welcome opportunity despite challenges

The Philippine Economic Zone Authority (PEZA) on Friday said it sees the 17% tariff by the United States as “generally a welcome opportunity” for Manila to expand its trade and investments with Washington despite some challenges.

“The PEZA acknowledges the recent imposition of a 17% tariff by the US on Philippine-made goods as generally a welcome opportunity for the country to broaden its trade and investments with the US,” PEZA said in a statement.

However, PEZA said the higher tariff to the Philippines also poses challenges for companies operating within its economic zones.

PEZA noted that locators from the industries of electronics manufacturing services and semiconductor manufacturing services (EMS-SMS) as well as information technology and business process management (IT-BPM) have the biggest share in export sales at 44.5% and 28.5%, respectively.

The US is also the Philippines’s top export destination, according to PEZA.

PEZA said the 17% tariff will make Philippine exports to the US more expensive.

Meanwhile, PEZA noted that the US tariff on the Philippines remains among the lowest in Southeast Asia compared to Vietnam with 46%, Thailand with 36%, Indonesia with 32%, and Malaysia with 24%.

“This comparatively lower rate highlights the strong economic ties between the Philippines and the US and positions the country more favorably than its regional counterparts,” it said.

“PEZA sees this as an opportunity to attract greater investment—particularly from companies based in countries imposed higher tariffs by the US—seeking to reduce export costs by relocating operations to the Philippines,” it added.

Strategy

In light of this development, PEZA said it is promoting the Philippines under the “China+1+1” strategy to encourage businesses to maintain operations in Beijing while diversifying their supply chains by expanding into Manila.

PEZA said measures are in place to ease the impact of the US tariff and make the Philippines an even more attractive investment destination.

These measures include the Philippines’ participation in the Regional Comprehensive Economic Partnership (RCEP), intra-ASEAN trade, the impending renewal of the European Union Generalized Scheme of Preferences (EU GSP), and the enactment of the CREATE MORE Act.

According to PEZA, the Philippine government may lobby for a reduced (sectoral) tariff for exports of electronics-semiconductor products and IT-BPM services.

“This proposal is worth considering by the US since a big number of our EMS-SMS and IT-BPM investors are American companies that provide critical support to their principals and major clients in the US—whose products and services ultimately benefit American consumers,” it said.

Aside from this, PEZA said the Philippine government may also offer to reduce the current duties on essential goods/services that Manila imports from the US following the true spirit of reciprocal tariffs.

PEZA said that this strategy aligns with the pronouncement of Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go that the US’ 17% tariff on Philippine goods is a boon rather than a bane for the country's economic future.

“We view with guarded optimism that the recent US imposition of reciprocal tariffs will provide strategic opportunities for the Philippines to improve its economic relationship with the US,” DTI Secretary and PEZA Board Chairman Cristina Aldeguer-Roque said.—Joviland Rita/AOL, GMA Integrated News