The Philippines recorded its narrowest trade deficit in six months in August, but the improvement masked new signs of weakness as higher American tariffs began to weigh on exports to the United States.
Filipino exports grew by 4.6 percent to $7.1 billion, the weakest pace of expansion in eight months, the Philippine Statistics Authority reported on Tuesday.
Notably, outbound shipments to the US–which imposed a 19 percent tariff on Filipino goods beginning Aug. 1–collapsed by 11.2 percent. But this was offset by higher demand from other trading partners like Hong Kong (+26.4 percent) and Japan (+4.7 percent).
Imports, meanwhile, contracted by 4.9 percent to $10.6 billion in August, snapping two straight months of growth. Purchases of raw materials dipped by 6.2 percent while energy imports fell by 34.2 percent.
Front-loading tapers
A closer look at the data suggested the slowdown in exports reflected a tapering of the pre-Aug. 1 rush to take advantage of lower tariffs.
Imports, meanwhile, pulled back, signaling a cooling in domestic demand that could leave the consumption-driven economy more vulnerable to external headwinds.
Even so, Filipinos still imported $3.54 billion more than they exported in August. That trade gap was 19.4 percent smaller than a year ago and marked the narrowest shortfall since February’s $2.97 billion.
For the first eight months of the year, the trade deficit reached $32.38 billion, 6 percent lower than the same period last year.
Normalization
John Paolo Rivera, a senior research fellow at the state-run Philippine Institute for Development Studies (PIDS), said the latest data may reflect a normalization of trade flows after the Aug. 1 US tariff deadline had ended.
Rivera flagged ‘slower domestic activity and the tapering off of pre-tariff front-loading,’ adding that ‘downside risks remain from global uncertainties and tighter financial conditions.’
Miguel Chanco, an economist at London-based Pantheon Macroeconomics, said such a decline reflected ‘a deterioration in actual import demand, rather than an unfavorable turn in commodity prices.’
‘Real import demand in the Philippines has had a bleak third quarter so far,’ Chanco said.
Looking ahead, PIDS’s Rivera said, ‘A sustained trade recovery will depend on export diversification and improving logistics competitiveness.’ /dda