President Marcos Jr’s zero-tariff commitment made to the United States (US) during his recent trip will cost the Philippines some Php3-6 billion in lost revenues, according to initial estimates by the Department of Finance (DOF). But the real cost may be even greater – not just in terms of foregone revenues but also in losing opportunities for development.
The president hailing the deal as a “significant achievement” seems oblivious to how the US, the most powerful country and biggest economy in the world, just protects itself even more while the Philippines, the 66th poorest country in the world, just opens up even further.
The net result is that the US raises tariffs on the Philippines from the pre-Trump 3.6% (simple average Most Favored Nation, or MFN, rate) to 19 percent. Meanwhile, the Philippines reduces its tariffs on the US from 6.2% (simple average MFN) to 0%, if Pres. Trump is to be believed.
The tariff revenue loss is only the most immediate and visible consequence of the one-sided deal. Tariff revenues are not a trivial income source. In 2024, the Bureau of Customs (BOC) accounted for 21% of total government revenues, amounting to Php916.7 billion from customs-related sources, including tariffs, excise duties and other fees. Cutting tariffs obviously reduces public resources for essential services, especially as the government resists implementing compensatory mechanisms like progressive tax reform.
IBON Foundation estimates that the Philippines stands to lose some Php31-35 billion in tariff revenues, according to Pres. Trump’s declaration of the country as an “open economy” with zero tariffs on US products. This is based on an overall average tariff of 6% on imports from the US and not the specific tariffs on different products, which can range from 0-40% depending on the product.
The country will forego some Php3.97 billion in revenues from the four products that have already been announced as having zero tariffs: Php1.6 billion in lost revenue from automobile imports, Php1.2 billion from wheat, Php730 million from soy products, and Php440 million from pharmaceuticals.
Tariffs are not just for generating revenues though. Astride meaningful domestic support schemes, they are essential tools for rural development and Filipino industrialization.
Many may not know that the Philippines’ biggest imports from the industrial power US are agricultural products, nor that most Philippine exports to the US aren’t actually made by Filipinos.
The US is the largest single-country supplier of agricultural products to the Philippines, with top exports including soy, wheat, dairy products and meat. As it is, the Philippines is the US’s biggest market for its agricultural exports in Southeast Asia, and its 8th biggest in the world.
In contrast, the Philippines’ top export to the US are electronic products, mainly semiconductors and electronic data processing equipment, amounting to US$6.4 billion or 52.9% of total Philippine exports to the US. However, these are manufactured by foreign companies merely operating in the country and not by Filipino producers. This means that foreign firms reap all the benefits of these high-technology exports and not domestic producers or the wider economy.
Removing tariffs on the US, a vastly more industrialized and agriculturally developed power, undermines our policy space to help domestic producers develop, compete, and diversify. On the other hand, the Philippines now faces even more restricted market access to the US due to Trump’s “Liberation Day” tariff hikes, which raised tariffs on the Philippines to 17 percent. This was followed by an additional 2 percentage point increase to 19% due to subsequent failed negotiations by the government.
This one-sided deal reinforces our dependency on low value-added exports while increasing US import penetration in sectors where local producers might otherwise have a chance to grow. It also increases the US’s geopolitical leverage and gives even more opportunities for the US to weaponize its trade and investment flows with the Philippines.
Aside from this, other trade partners might sooner or later demand the same kind of concessions for parity with the US, further eroding not just our tariff revenues but also our policy space.
We still don’t know the full extent of the deal Pres. Marcos Jr struck with the US. The government is being very opaque about any other economic, political or military concessions it might have given. But if the grossly one-sided tariff deal is any indication, this ambiguity could very well be hiding something even worse – possibly explaining the deal’s conspicuous omission from the president’s State of the Nation Address (SONA).