Philippines may negotiate US tariffs down to 10% — BMI

THE PHILIPPINES has room to negotiate with the US to bring down its reciprocal tariff to as low as 10% using defense concessions as a key bargaining chip, according to Fitch Solutions' research unit BMI.

- By Luisa Maria Jacinta C. Jocson Senior Reporter

"While [former US President Donald J.] Trump has raised the rate from 17% to 20% for no explicit reason, the Philippines still faces some of the lowest tariffs in Asia," Darren Tay, head of Asia country risk at BMI, told a webinar on Thursday.

"Overall, we still think the Philippines stands a good chance of bargaining the reciprocal rate down to the baseline 10%," he added.

The Philippine government earlier said it is working to secure better terms with the US after Mr. Trump announced a 20% tariff on Philippine goods last week, effective Aug. 1.

"While few details have emerged from bilateral trade talks, we believe defense spending will emerge as a point of contention in the proceedings," Mr. Tay said.

"Making concessions on defense is one good way of securing a trade deal, given that pushing allies to do more is one of Trump's priorities," he added.

He said increasing defense spending to 5% of economic output, similar to North Atlantic Treaty Organization benchmarks, would "impress" Mr. Trump, but noted that the Philippines is likely to propose a lower percentage.