Phl Needs Lower US Tariffs

Attracting foreign investments that can help fuel economic growth for the Philippines could face headwinds if the Philippines is not able to successfully negotiate a lower tariff rate from the US.

- MARIANNE GO

This was the assessment of HSBC's chief executive officer Sandeep Uppal during his presentation at the recent EJAP Economic Forum held at the BSP Complex last Monday, Aug. 11, where he warned that "without the relative advantage of a lower tariff rate, economic growth will face headwinds and it will also be harder to attract FDIs."

The US had initially announced a 20 percent tariff on the country. But following a state visit by President Marcos and his economic team, the tariff was reduced by only one percentage point to 19 percent.

It was also initially understood that the semiconductor exports would continue to be exempt from tariffs under an existing trade agreement.

Unfortunately, social media announcements from the US government indicated another change in the tariff treatment for semiconductor imports to the US, with a steep 100 percent tariff.

Special Assistant to President Marcos for investments and economic affairs, Secretary Frederick Go, admitted that they are also surprised by the new tariff announcement on semiconductors, and would thus continue to talk with the US Trade Representative.

Uppal agrees that "Philippine authorities should continue to negotiate with the US in the hope of decreasing the tariff rate further. Without the relative advantage of a lower tariff rate, the Philippines will likely rely on its old (but effective) playbook of maintaining a robust reform narrative to attract investments and technologies from abroad."

Mr. Uppal, in his presentation, acknowledged that the Philippines has a high growth economy that is currently the fastest in the Association of Southeast Asian Nations or ASEAN, with a forecast growth of 5.4 percent for this year and a potential growth rate of 5.8 percent next year that could be the No. 1 GDP growth rate in ASEAN by 2026.