In the middle of mixed reactions towards the United States’ 19% tariff on Philippine exports, Nomura Global Markets Research stated that the country’s gross domestic product (GDP) growth could be cut by 0.4%, according to a BusinessWorld news report. Recently, US President Donald Trump and Philippine President Ferdinand “Bongbong” Marcos, Jr., met in the White House which resulted in the new tariff.
To put things in perspective, posted below is an excerpt from the news report of BusinessWorld. Some parts in boldface…
THE United States’ 19% tariff on Philippine goods could cut the Philippines’ gross domestic product (GDP) growth by 0.4 percentage point (ppt), Nomura Global Markets Research said.
In a report, Nomura said the US tariff of 19% on Philippine goods is “fairly high” and poses downside risks to growth.
“We estimate the direct effects could reduce our baseline GDP growth forecasts by a still-substantial 0.4 ppt in the Philippines.”
Nomura said this projection is “relatively substantial” compared to its baseline growth forecasts of 5.3% and 5.6% for this year and 2026, respectively.
“This is partly because we assigned 10% as the level where the reciprocal tariff rate could settle, on the assumption that the Philippines is a strong ally of the US and is not a third country for transshipments,” Nomura said.
“As it turns out, despite the visit to Washington by President Marcos and both sides reiterating the need for a strong partnership, the tariff was still set at 19%, which is even higher than the ‘Liberation Day’ level of 17%.”
Last week, Philippine President Ferdinand R. Marcos, Jr. met with US President Donald J. Trump at the White House in Washington, DC. Mr. Trump announced a 19% tariff would be imposed on Philippine goods, which will take effect starting Aug. 1.
“The trade ‘deals’ therefore represent upside surprises in terms of tariff rates, especially for the Philippines,” Nomura said.
“As a result, if implemented and these tariff rates are sustained, these will likely further weigh on growth in both countries relative to our current baseline forecasts.”
The government expects GDP to grow by 5.5-6.5% this year, lower than its previous target of 6-8%.
“While these ballpark estimates make sense to us, uncertainty remains high and these are ‘only’ taking into account the direct effects on these ASEAN countries’ exports to the US,” Nomura said.
These estimates do not account for sectoral tariffs, such as in semiconductors and pharmaceuticals, which are currently exempted, it added.
“But as our US team highlights, the risk is these could be set higher, though some countries could be exempted, adding to the uncertainty. As mentioned above, the details of the trade deals with Indonesia and the Philippines are still limited.”
Let me end this post by asking you readers: What is your reaction to this recent development? Do you think the Philippines is in a serious disadvantage with the American tariff of 19% imposed on the nation’s exports? Do you think the Philippine economy still has strong momentum to reach 6% GDP growth by the end of this year?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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