The trade negotiations between the Philippines and the United States serve as a litmus test for the Marcos administration’s capacity for strategic bargaining. The Philippines must leverage its geopolitical advantages to achieve economic goals while safeguarding national interests in security, natural resources, and policy sovereignty. The outcome of these negotiations will shape not only the bilateral relationship but also the Philippines' role in the emerging trade and security architecture of the Indo-Pacific region.

As trade tensions continue to escalate, the upcoming meeting between Philippine President Ferdinand Marcos Jr. and US President Donald Trump in Washington marks a pivotal moment in bilateral efforts to ease tariff barriers and deepen economic cooperation. The talks are expected to blend high-stakes strategic bargaining with pressing domestic economic priorities.

1. Background and Negotiation Drivers

The Philippines is facing an unexpected and burdensome tariff hike from the United States—a “reciprocal tariff” of 17% introduced in April 2025, which was raised to 20% in early July, days before President Marcos's official visit. Widely seen as punitive, the tariff has drawn criticism from industry leaders and human rights groups alike, placing immense pressure on key export sectors such as semiconductors and electronics—cornerstones of the Philippine economy.

President Marcos has prioritized trade and investment promotion as the main objective of his visit, expressing his readiness to pursue a bilateral trade agreement that is forward-looking and mutually beneficial.

2. Strategic Bargaining Chips on the Table

In exchange for reduced tariffs and increased US investment, the Philippines appears willing to offer strategic concessions:

(i) Expanded US military access under the Enhanced Defense Cooperation Agreement (EDCA), especially in Luzon, near the Taiwan Strait.

(ii) Preferential mining rights, including access to critical minerals such as rare earth elements, vital for global high-tech supply chains.

(iii) Cooperation in energy, nuclear technology, cybersecurity, and telecommunications, aligning with US Indo-Pacific priorities.

In return, Manila seeks:

• Tariff reductions or exemptions for key industrial exports, notably semiconductors and electronics;

• Increased US investments, particularly in defense and downstream manufacturing;

• Protection for Filipino nationals in the US, including lower remittance fees and safeguards against forced deportation.

3. Domestic Response and Expert Analysis

Domestically, the US tariff hike has triggered a backlash in Philippines. The International Coalition for Human Rights in the Philippines (ICHRP) labeled it as “naked bullying” that disproportionately harms the poor while dragging the country deeper into geopolitical conflict with China.

Financial analysts warn that Manila is caught between a rock and a hard place—either make strategic concessions for economic relief or risk losing US support amid growing regional tensions. Some experts recommend leveraging negotiations to demand US investment in refining and processing facilities, enabling the Philippines to export higher-value products.

4. Impact on Agriculture and Industry

The impact on agriculture is expected to be limited since the main Philippine agricultural export to the US is coconut oil. However, if Manila reduces tariffs for American agricultural imports such as soybeans, pork, chicken, and wheat, domestic farmers could face stiff competition.

The 20% US tariff threatens to erode the competitiveness of the Philippine semiconductor sector—particularly compared to Viet Nam, which enjoys higher export volumes to the US but faces comparable tariff rates.

5. Long-Term Strategic Outlook

Analysts note that the US is adopting a more transactional approach to trade, prioritizing strategic leverage over traditional alliance-based cooperation. The recent tariff hike—despite longstanding military ties—underscores Washington's willingness to use economic tools to further geopolitical objectives.

With the Philippines increasingly pivoting away from China and relying more on the US for defense, it must carefully balance strategic concessions with economic gain. This includes using EDCA access and mineral rights as bargaining tools for real benefits in technology, investment, and industrial autonomy.

Source: South China Morning Post