No meaningful edge from 19% duty for PH

The Evolution of No Meaningful Edge A Reality Check for Philippine FDI

As the Philippines grapples with a limited tariff gain under its trade deal with the United States, economists caution that this may not be sufficient to attract foreign direct investments (FDI) and sustain economic growth. This reality check highlights the need for the country to reassess its investment strategy.

A Missed Opportunity

Prior to the announcement, optimism was building among investors and policy analysts who speculated that the Philippines could secure a more favorable tariff arrangement, particularly given its narrow trade deficit with the US compared to other Asean peers. However, with the 19% duty announced by US President Donald Trump, officials' hopes for a larger reduction have been dashed.

The Impact on FDI

HSBC Global Research economist Aris Dacanay warns that this development could dampen hopes of the Philippines becoming a more attractive destination for export-driven investments. Without the relative advantage of a lower tariff rate, economic growth will face headwinds, and it will also be harder to attract FDI.

The Road Ahead

With the Philippines placed on nearly the same tariff footing as Indonesia and slightly ahead of Vietnam, the country is unlikely to gain any unique edge that could tilt supply chain relocation decisions in its favor. Instead, Dacanay suggests that the country's export competitiveness could be further undermined by other macroeconomic headwinds.

A New Playbook

HSBC maintains its Philippine GDP growth forecasts at 5.4% for this year and 5.8% for 2026, citing ongoing domestic reforms and infrastructure development as key supports. However, it warns that downside risks are increasing. To overcome these challenges, the country will likely rely on its old playbook of maintaining a robust reform narrative to attract investments and technologies from abroad.

A Path Forward

To improve the country's competitiveness with or without the uncertainty of tariffs, Dacanay emphasizes the importance of continuing ambitious infrastructure agenda and liberalizing different sectors, such as the renewable energy sector. By doing so, the Philippines can create a more attractive environment for FDI and drive economic growth.

In conclusion, the evolution of no meaningful edge in the Philippines' tariff arrangement with the US highlights the need for the country to diversify its investment strategy and focus on other markets. By adopting a new playbook and emphasizing domestic reforms and infrastructure development, the Philippines can overcome these challenges and continue to attract FDI and drive economic growth.

Keywords Foreign Direct Investments (FDI), Trade Deal, Tariffs, Economic Growth, Infrastructure Development, Domestic Reforms.

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Edward Lance Arellano Lorilla

CEO / Co-Founder

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