Food exporters bracing for impact of US tariffs

MANILA, Philippines —  The country’s food exporters are bracing for lower demand from US consumers but remain optimistic that state negotiators will pull off a trade deal with the Western economy to slash its 20 percent tariff on Philippine goods.

The higher tariff rate on Philippine agricultural commodities and food products will just be passed on to US consumers, resulting in higher retail prices, according to the Philippine Food Processors and Exporters Organization Inc. (PhilFoodex).

  US consumers may veer away from more expensive Philippine agricultural and food products and look for cheaper alternatives as a result of the reciprocal tariffs being passed on to the retail level, PhilFoodex said.

The situation could lead to economic fallout, forcing micro, small and medium enterprises (MSMEs) exporting to the US to lay off workers, the group added.

“We do not want that to happen but if our exports weaken then we will have no choice,” PhilFoodex president Ruben See said, noting that most MSMEs export through consolidators.

Some of the products affected include processed fruits, dried fruits, snacks, coconut-based items, condiments and juices, See said.

Despite the Philippines having a tariff advantage compared to most of its Southeast Asian neighbors, the country’s food industry is still being challenged by higher production costs, putting it at a disadvantage, See said.

The US, under its reciprocal tariff regime, is slapping a tariff of 20 percent on the Philippines and Vietnam, 32 percent on Indonesia and 36 percent on Thailand.

See urged the government to sustain its trade negotiations with the US to broker a deal that will reduce the tariffs to as low as zero or as high as five percent.

“We will be happy with five percent but if it remains at 20 percent then we will be having difficulties,” he said.

“The US is important since it is already a captured market. We may be able to find alternative markets but the US market is different,” he added.

The United Coconut Association of the Philippines (UCAP) expects dampened demand for coconuts from American consumers due to higher prices but the country may have the upper hand over other coconut-exporting countries because of tariff advantage.

“The Philippines will even be more competitive than its closest rivals for coconut – India and Indonesia. Vietnam and Sri Lanka are small coconut producers and exporters,” UCAP chairman Marco Reyes said.

“But the situation is still dynamic. There are still a lot of negotiations ongoing between the US and the Philippines,” he added.

Reyes said it would still be “business as usual” for exporters since there is no competing coconut industry in the US, which is the country’s second largest market for coconut-based items.

Nevertheless, the government should also strengthen the coconut industry by expanding export markets and diversifying products into more value-added ones like coconut milk and coconut water since the industry is dependent on Europe and US, Reyes said.

Meanwhile, the Federation of Free Farmers (FFF) warned the government against offering concessions on agricultural products just to reduce the US’ reciprocal tariffs on Philippine goods.

“We are worried that our agri-fisheries sector will be used as a bargaining chip to convince the US to reduce its tariffs. This is not only unfair, but could be devastating, to the country’s farmers and agricultural sector,” FFF national manager Raul Montemayor said.

The country posted a $1.95-billion agricultural trade deficit with the US last year, according to the Philippine Statistics Authority (PSA).

The country exported $1.37 billion to the US but imported $3.32 billion of agricultural goods from the Western economy, based on PSA data.

PSA data showed that almost 18 percent of the country’s total agricultural exports last year went to the US.

Some of the country’s top agricultural exports to the US were vegetable fats and oils, edible fruits and nuts, fish and fish products and preparations of cereals.