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The Philippine logistics community weighed in on higher US tariff on Philippine-made goods, with some saying it’s too premature to predict the outcome and others seeing a potential export advantage
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Some others have adopted a grim view: higher prices of goods, slower economic growth and stagflation
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An assessment of supply chains, exploration of alternative sources and optimization of costs and stronger collaborations may be in order to better cope with the new tariff regime, according to an association
The Philippine logistics community weighed in on higher US tariff on Philippine-made goods, with some saying it’s too premature to predict the outcome and others seeing a potential export advantage. But some other sectors offer a grim view: higher prices of goods, slower economic growth and stagflation.
The US government announced on April 2 the imposition of a 10% tariff on majority of goods imported to the US, effective April 5. Philippine exports to the US will be slapped a 17% tariff starting April 9.
Association of International Shipping Lines president Patrick Ronas in a message to PortCalls said while “the new tariff threw a spanner” in the works, it’s still “too early to tell how this will affect cargo volumes.
“I am sure (shipping) lines will calibrate once they assess the impact per industry per country. I believe trade to the US will not stop, (it) being the biggest economy,” he said. He, however, noted any decline in trade to the US will be troubling for carriers as this may lead to overcapacity.
“But again, it is too early but lines will certainly be there to carry cargo and support trade,” Ronas said.
Philippine Multimodal Transport and Logistics Association, Inc. president Erich Lingad, in a message to PortCalls, said the government “should leverage this advantage to attract investors,” referring to the Philippines’ lower tariff rate compared to other Southeast Asian countries. The US is imposing a 49% tariff on Cambodia; 46% on Vietnam; 36%, Thailand; 32%, Indonesia; and 24%, Malaysia.
In order to cope with the new tariff regime, Lingad advised freight forwarders handling US-bound shipments to “expand services, further reduce costs by negotiating with airlines and shipping lines, and to collaborate with US-based forwarders.”
Philippine Exporters Confederation, Inc. vice president for Advocacy, Communications and Special Concerns Division Ma. Flordeliza Leong told PortCalls the country is “relatively better positioned” vis-a-vis other countries with higher tariffs. “Plus there are exceptions to the higher tariffs that include steel, auto parts, semiconductors which are/in our major exports.”
Even as the Philippines faced lower tariffs vis-a-vis other countries, the Supply Chain Management Association of the Philippines in a statement sent to PortCalls said, “the impact will still be widespread. Our goods are part of interconnected supply chains that cross borders; we expect to see price increases in essential and everyday goods, burdening Filipino consumers. This could lead to weaker consumption, slower economic growth, and stagflation. Certain sectors, like manufacturing and semiconductors, will be particularly affected.
“To mitigate the impact of the global trade war and ensure continued economic growth, stakeholders should work together. Opportunities may arise for manufacturers seeking to relocate from countries with higher tariffs, but this requires attracting investors and pursuing ease of doing business and cost reductions, particularly in energy and logistics. Government should continue pursuing trade relationships with other export markets, and communicate the situation clearly to consumers as it strives to maintain competitive prices.”
The association said: “The private sector should assess its supply chains, explore alternative sources, and optimize costs and value to consumers through digitalization, stronger collaborations, and perhaps even competitors.”
Welcome opportunity
The Philippine Economic Zone Authority (PEZA) in a statement said they see the tariff as “generally a welcome opportunity for the country to broaden its trade and investments with the US.”
The agency said it recognizes the challenges the tariff presents for companies that operate in economic zones.
The US is the country’s top export destination. Ecozone locators from the electronics manufacturing services and semiconductor manufacturing services (EMS-SMS) and information technology-business process management (IT-BPM) industry account for the biggest share in export sales to the US at 44.5% and 28.5% respectively.
While the 17% tariff “will make Philippine exports to the US more expensive, it is worth noting that this rate remains among the lowest in Southeast Asia,” PEZA said.
“This comparatively lower rate highlights the strong economic ties between the Philippines and the US, and positions the country more favorably than its regional counterparts. PEZA sees this as an opportunity to attract greater investment—particularly from companies based in countries imposed higher tariffs by the US—seeking to reduce export costs by relocating operations to the Philippines,” it added.
International Monetary Fund (IMF) managing director Kristalina Georgieva in a statement said they are also still assessing the macroeconomic implications of the tariff measures, “but they clearly represent a significant risk to the global outlook at a time of sluggish growth.”
She said: “It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”
She added that the IMF will be sharing the results of their assessment in the World Economic Outlook, which will be published during the IMF/World Bank Spring Meetings later this month.
John Manners-Bell, chief executive of Transport Intelligence Insights, said the impact of the US tariff on the logistics industry is nuanced.
In a statement, he said: “The increased complexity of the administration of tariffs and international trade processes will help many freight forwarders improve their yields, essentially by selling higher value services leveraging their experience and know-how. At the same time many global logistics companies are benefiting from increased interest and usage of warehousing facilities in US free trade zones which allow for goods to be stored and, in some cases, manufactured without incurring tariffs. These are only imposed when they enter free circulation in the USA.
“However, in contrast to this, it seems inevitable that trade volumes will reduce as demand decreases which will impact shipping lines and air cargo operators in particular. In theory, domestic US trucking companies will benefit as more supply chains are localized and the manufacturing base increases, although there will be negative impact on drayage and Canadian and Mexican cross-border services as seen already in terms of shipments of vehicles.”
Citing the comment of Peter Tirschwell at the Journal of Commerce, Manners-Bell said that while the imposition of Trump’s tariffs could be regarded as yet another “Black Swan” event impacting the industry, it will have a very different impact from others.
“President Trump has provided us with the detail of his plans, but the reality is that there is still too much uncertainty for manufacturers and other supply chain parties to adapt business strategies,” he noted.
“Even after the ‘Liberation Day’ announcements, this situation is likely to continue for some time as trade parties, businesses and industry sectors try to negotiate exemptions. Businesses are crying out for a stable regulatory regime which allow them to plan for the future, whatever it may hold. However, it is unlikely that this announcement will provide them with that clarity,” he added.
Philip Damas, head of Drewry Supply Chain Advisors, also noted that “the situation is highly dynamic with considerable uncertainty over how those countries most affected will respond or seek to mitigate the full impact of the measures announced.”
In Drewry’s opinion, “these developments will have significant implications for the future shape of international trade – with stakeholders across the global container shipping industry now reassessing their markets, supply chain, sourcing and service decisions.”
“The high but uneven level of tariffs will result in both reductions in international trade volumes and in shifts of volumes, with winners and losers,” Damas added. – Roumina Pablo
