How will higher US tariffs on Philippine goods affect Filipinos?

The United States recently imposed another round of unilateral tariffs on several countries, including the Philippines after it failed to curb the importation of goods produced with forced labor.

Washington said that the decision for a 12.5% rate tariff on Philippine goods entering America was a result of months-long investigation across 60 economies under Section 301 of the US Trade Act of 1974, “whether any of the economies subject to these investigations fail to prohibit or to effectively enforce a prohibition on the importation of goods produced wholly or in part with forced labor.”

The Department of Foreign Affairs (DFA) has said goods produced in the Philippines are not made using forced labor.

READ: DFA: Philippine goods not made with forced labor amid new US tariff

Prior to this, the US had already imposed a 10% tariff on Philippine goods entering its country. The Department of Trade and Industry (DTI) said that they were already negotiating with their US counterparts to show that the Philippines has a strong policy against forced labor.

But how will this latest round of tariffs impact the average Filipino?

Slower trade, higher inflation

Rizal Commercial Banking Corp. chief economist Michael Ricafort told GMA News Online that this latest tariff could slow down several economic activities, just like how the last set of US tariffs last year did.

Some of these activities affected include exports and trade, investments, employment, and more, he said.

The tariffs, coupled with continuing fuel disruptions due to the Middle East conflict, a weaker peso, and the droughts caused by the El Niño, “could lead to higher prices/inflation and slower economic/GDP growth,” the economist said.

It is important to note that the inflation rate is not simply the cost of goods per se—it is the rate in which the prices of commodities increase within a given time.

Ricafort said that the higher inflation rate could lead to higher interest rates from the Bangko Sentral ng Pilipinas (BSP) in order to bring inflation rates back to its targets.

According to an explainer from the BSP, interest rates can be increased when they want to dissuade people from borrowing. Less borrowing means less spending, and less spending means more saving. The less money that there is circulating in the economy, the less demand there is and ideally, this could lead to deflation or the cost of goods going down. However, this could also lead to a sluggish economic performance.

Moreover, countries could also impose retaliatory tariffs against the US, Ricafort said. This could further slow down economies worldwide.

Ricafort said that if the Philippines wanted to mitigate the impacts of these tariffs, then the government should increase and diversify its export markets to reduce its reliance on the US market.

Negotiations ongoing

The Department of Foreign Affairs (DFA) has denied claims that the Philippines was using forced labor for the products it exports into the US.

“The Philippines already has existing laws prohibiting forced labor and continues to strengthen its legal and institutional framework through the development of appropriate mechanisms to effectively investigate and address goods allegedly produced wholly or in part through forced labor,” the DFA said.

The Department of Trade and Industry (DTI) also said that it will engage with its US counterpart on the matter to show that the Philippines has strong policies against forced labor.

Both the DTI and the DFA said that talks with the US are ongoing. —VAL, GMA News