LAST Wednesday, US President Donald Trump released a set of letters to six of its trading partners setting tariff rates for their products and services bound to the US market. Among these letters was one addressed to the Philippines imposing a 20 percent tariff on Philippine exports to the US.
While the Marcos administration pursues negotiations to forge a more favorable bilateral economic deal between the two longtime allies, questions remain and the most pressing of which are: What exactly does the imposition of these tariffs mean and what can the Philippines do as a response?
The effect of tariffs, in a nutshell
Tariffs, as essentially taxes on imported goods, are one of the means by which countries protect their domestic industries from being dominated by foreign competition. Tariffs make imports more expensive and encourage consumption from domestic producers of the same products.
For exporters such as the Philippines, this is bad news. The imposition of tariffs means that Philippine exports to the US will cost more for the average American consumer, leading to lower demand for Philippine products. This causes losses for not only Philippine exporters, but also for the government.
The lower demand caused by more expensive Philippine goods not only means that there are fewer export transactions from Philippines producers to American consumers, but also spells lower collectible taxes for the Philippine government.
The imposition of tariffs by the US also deals a heavy blow to the Philippine economy as US trade accounted for 16 percent of the Philippines’ total exports from January to May of 2025.
WTO’s TBT Agreement as a possible recourse
The World Trade Organization’s (WTO) ‘Technical Barriers to Trade Agreement’ may be a trump card that the Philippines can use to soften the effects of the newly imposed tariffs. Currently, the WTO Agreement limits technical barriers to trade (TBTs) that often come in the form of stringent technical regulations and standards imposed to prevent international trade such as product standards, labelling requirements, and testing procedures.
TBTs are also a form of anti-tariff measures, since some states resort to more stringent use of technical regulations and standards to protect their domestic industries from the influx of imported goods, essentially using these standards as a substitute for the imposition of tariffs.
The imposition of TBTs on top of tariffs creates a sort of ‘double protection’ that amplifies the protective effect of tariffs since exporting states not only get taxed extra by the importing state because of the tariffs, but must also comply with unduly burdensome standards to even complete a transaction.
Applying this concept in reverse, the TBT Agreement may be used by the Philippines to ensure that non-tariff measures do not create additional barriers to its exports by identifying technical regulations imposed by the US that are not based on international standards, are more trade-restrictive than necessary, and discriminate against Philippine exports.
Through this, the Philippines can reduce non-tariff costs of trade and improve market access, notwithstanding the existence of tariffs.
It then becomes a numbers game because although there is an additional tax imposed, exporters can lower their costs by having to comply with fewer requirements, thereby counteracting the additional costs caused by the tariffs.