THE Philippines should begin crafting industrial policies and redistributing its assets to create domestic demand for its commodities as the tariff imposed by US President Donald Trump weighs on the country’s export-driven industries, an economist said.
University of the Philippines labor and industrial relations professor Benjamin Velasco said the impact of the 19-percent US tariff would affect not only the garments sector but also other key export industries such as agriculture and electronics.
‘Those industries will be hit with the same tariff rates so they will be just as vulnerable as garment exports,’ Benjamin said. ‘Hopefully, exporters in electronics and agriculture can also share the burden of the tariffs with their customers as some garment exporters reportedly did.’
He said factory shutdowns and production slowdowns in export industries could lead to layoffs, reduced incomes and slower growth, noting that the government is already predicting that only the low end of its 5.5 to 6.5 percent growth target for 2025 may be achieved.
In July 2025, the United States announced a 19-percent tariff on goods imported from the Philippines under its new ‘reciprocal trade’ policy, a measure in line with the US’s push to ‘rebalance’ trade flows.
Under the deal, the Philippines is expected to grant zero tariffs on selected American products while its own exports face the 19-percent rate upon entry to the US market.
Critics have described the policy as ‘lopsided,’ arguing that the Philippines offered greater concessions while receiving limited relief in return.
The development has also drawn concern from local exporters, who fear higher costs could make Philippine products less competitive compared to goods from other Asian suppliers.
At last week’s budget hearing of the Department of Trade and Industry, Senator Imee Marcos also disclosed that a garment factory in Central Luzon is considering closure amid rising production costs and tariff pressures, a move that she said could displace around 3,000 workers.
Before this, the Confederation of Wearables Exporters of the Philippines (CONWEP) said the garments industry has already shed about 50,000 jobs between 2022 and 2024, and could face further contraction following a series of wage increases and the newly-imposed US tariffs.
‘Perfect storm’
CONWEP Executive Director Maritess Jocson-Agoncillo said the industry faces a ‘perfect storm’ of local and global challenges that have eroded its export competitiveness, noting that recent wage hikes alone have cut 2024 export revenues by about $260 million, or 25 percent, as major brands withdrew from the country.
Velasco explained that the shutdown of garment export factories would have ripple effects across related sectors such as textiles, logistics and retail.
‘Although, much of these will be offshore and won’t be felt in the Philippines,’ he added.
Unlike the garment sector, the impact of Trump’s tariffs on the Philippines is not yet severe enough to threaten the electronics and agriculture sectors, according to him.
‘If it was, we would have heard of possible closures and layoffs. Most garments [are] exported to the US so that is a disadvantage,’ he said. ‘Most electronics we produce are parts that go to China, Japan, or Taiwan for final assembly before being shipped to the US.’
Reskill workers, boost local demand
Velasco thinks the government should adopt proactive measures to cushion the impact on affected firms and workers through social protection and reskilling programs, while also rethinking the country’s long-term economic direction.
‘[The] government needs to be proactive by preparing assistance to firms and especially workers who have less resources to cope with economic crisis.’
‘In the immediate, there must be programs in place to transition affected workers, from social security and emergency work to job reskilling,’ he said.
He added that the country should eventually shift from an export-driven model to one that builds domestic demand through industrial policy and asset redistribution in the long term to build resilience against global trade disruptions.
‘High wages are a disadvantage for commodity exporters but a boon for domestic producers since it creates high demand,’ he explained.