Hours after a phone call with President Ferdinand Marcos Jr. and United States Secretary of State Marco Rubio’s meetings in Manila, President Donald Trump ordered the imposition of a 12.5-percent tariff on nearly all Philippine products.
Washington alleged that the Philippines-along with 60 other economies-has inadequately enforced bans on goods produced by forced labor.
In a notice released Friday, the Office of the United States Trade Representative (USTR) said it completed its Section 301 investigation and, after reviewing public comments, testimony, recommendations from the Section 301 Committee and advisory committees, as well as the direction of the US President, determined that additional duties were warranted.
The USTR said a 12.5-percent tariff on Philippine products was the ‘appropriate response’ to what it described as actionable trade practices under Section 301 of the US Trade Act.
Philippine Ambassador to Washington Jose Manuel ‘Babe’ Romualdez noted the new tariff rate is lower than the earlier 19-percent levy but said Manila will negotiate to bring it down further.
‘We are going to negotiate on the basis that we will remove the child-labor goods from our list of exports if it is proven to be so,’ Romualdez said. Trade Undersecretary Allan Gepty is heading the team.
The additional duties took effect at 12:01 p.m. Philippine time on July 24. However, goods already loaded onto vessels before that time and entered for US consumption before 12:01 p.m. Philippine time on July 28 are exempt from the new tariff.
The decision came even as Philippine trade officials maintained throughout the investigation that forced labor is not prevalent in the country’s export sector.
In its formal submission to the USTR earlier this month, the Department of Trade and Industry (DTI) said shipments denied entry into the US over forced-labor concerns totaled about $2.71 million, equivalent to roughly 0.01 percent of the $48.25 billion worth of Philippine goods imported by the US from 2023 through the first two months of 2026.
The DTI also argued that Philippine-made products, including exports bound for the US, ‘do not rely on forced labor,’ citing existing labor laws, enforcement mechanisms and trade data.
According to the USTR report, the tariffs cover all Philippine exports except steel, aluminum, copper, wood products, vehicles, and semiconductors.
Exemptions were also granted for civil aircraft, engines and parts, ground flight simulators, and pharmaceutical inputs. The USTR also added 471 products to the exemption list after public consultations, including:
Agriculture and food-instant coffee, planting seeds, livestock feed inputs, sugar products.
Critical minerals and metals-vanadium oxides, pig iron, aluminum and battery scrap.
Manufacturing and chemicals-semiconductor equipment, fertilizer/pesticide inputs, pharmaceutical ingredients.
Humanitarian and cultural goods-food, clothing, medicine donations, worn clothing, antiques, and works of art.
Categories
The USTR grouped the 60 economies slapped with tariffs under the Section 301 into three categories:
10 percent tariff economies-17 countries including India, Cambodia, Indonesia, Malaysia, Mexico, and the UK, which have partial or reciprocal regimes.
MFN-cap economies-EU and Taiwan (10 percent cap); Japan, South Korea, and Switzerland (12.5 percent cap).
12.5 percent tariff economies-38 countries including the Asean countries Philippines, Singapore, Thailand, Vietnam; BRICS economies Brazil, Russia, China and South Africa; other APEC members Australia, New Zealand, Chile, Hong Kong and Peru.
Disruptions
Exporters said they are now are preparing for possible disruptions to shipments and orders, with business groups warning that uncertainty could immediately affect trade even as the government continues discussions with Washington.
Country trade officials said talks with US authorities remain ongoing despite the tariff decision, expressing hope that the Philippines’s newly adopted Joint Administrative Order (JAO) on forced labor would support its position.
During a virtual press briefing on Friday, Trade Undersecretary Ceferino Rodolfo said the government remains engaged with US authorities following Washington’s decision.
‘We are very much encouraged by the continued positive engagement of the US with respect to this particular issue, including the recent issuance by the Philippines of the JAO,’ Rodolfo said.
The JAO, signed by the Departments of Trade and Industry (DTI), Labor and Employment (DOLE), and Finance (DOF), establishes an interagency mechanism for investigating and prohibiting the importation of goods produced wholly or partly through forced labor.
DTI Export Marketing Bureau Director Bianca Pearl Sykimte said the JAO was not issued solely in response to the US investigation but also to protect domestic industries from unfair competition.
‘We issued the JAO because we subscribe to the principles of decent work. It also affects the competitiveness of our businesses when we allow or we don’t have a mechanism to stop the importation of goods from forced labour which tend to be cheaper,’ she said.
Business groups, however, said the tariff could create immediate uncertainty for exporters while awaiting further guidance on its implementation.
Philippine Exporters Confederation Inc. President Sergio Ortiz-Luis Jr. said buyers and manufacturers may delay transactions until they have greater clarity on the measure.
‘Of course, the buyers will hold. And the manufacturers and exporters will also hold out until they’re sure if their production will be bought or not. Unless they can find another market for it,’ Ortiz-Luis said in a phone interview.
‘So, of course, there’s a certain cost disruption in the supply chain. The uncertainty, until it’s all clarified who’s exempted and who’s not, it will have an effect immediately,’ he added.
Meanwhile, Foreign Buyers Association of the Philippines (FOBAP) President Robert Young said the additional tariff further erodes the country’s price competitiveness, particularly for labor-intensive exports.
‘The 12.5 percent tariff imposed by US on Philippine exports is one more cross to bear in our free-on-board price quotations to buyers, especially in the garment and apparel sector,’ Young said.
He noted that Philippine products are already 10 to 15 percent more expensive than those of several ASEAN neighbors because of higher electricity, labor and logistics costs.
‘Therefore, we might end up losing purchase orders. Our sourcing strategies will be diverted. And eventually, export business to [the US] will come to a halt for the Philippines,’ he said.