U.S. import duties on the Philippines could discourage Taiwanese investment
In a recent development, the US has imposed a 19% tax on imports from the Philippines, a move that has prompted concerns among Taiwanese businesses operating in the country.
According to Lin Teng-feng, president of the Taiwan Association Inc Philippines (TAP), this tariff increase has led to a reconsideration of relocating factories to the Philippines by some Taiwanese companies. The tariff hike narrows the cost advantage the Philippines once had over other Southeast Asian countries, making it less attractive for export-oriented manufacturing destined for the US market.
Before the tariff increase, the Philippines had a relatively lower tariff compared to countries like Vietnam, which has a 20% rate. This lower tariff had made the Philippines an appealing destination for Taiwanese manufacturers seeking to diversify their supply chains away from China.
However, more than 80% of Taiwanese businesses in the Philippines serve the domestic market and are less affected by the tariff increase. Those focused on exports to the US, on the other hand, are deterred by the higher tariffs and related uncertainties.
Lin Teng-feng also warned of the potential risk from Chinese dumping, which could disrupt the local market if Chinese manufacturers face difficulties associated with exporting to the US and turn to dumping products in the Philippines.
Chang Che-chia, a Taiwanese business owner in the Philippines, has observed a noticeable drop in orders from US buyers over the past few months. Despite this, Chang believes that the Philippines still has significant investment potential if it improves administrative efficiency and strengthens its supply chain.
With the tariff rate now roughly the same as other Southeast Asian countries, some Taiwanese firms may put their plans to relocate to the Philippines on hold. This decision could have implications for the local economy, particularly in areas where Taiwanese businesses are concentrated.
It is important to note that the tariff increase is just one of several factors influencing the decisions of Taiwanese businesses. Other challenges such as Chinese overcapacity and slow administrative processes in the Philippines also contribute to making Taiwan businesses cautious about large-scale factory relocations there.
In conclusion, the US tariff hike has reduced the Philippines' cost competitiveness for export manufacturing in Taiwanese companies’ supply chains, leading to reconsideration or slowing of factory relocations to the country. However, if the Philippines can address these challenges and improve its business environment, it may still attract investment from Taiwanese businesses in the future.
- The rise in tariffs on imports from the Philippines has caused some Taiwanese companies to reconsider relocating factories to the country, particularly those focused on exports to the US market, as the Philippines' earlier cost advantage over other Southeast Asian countries has been diminished.
- With the tariff rate in the Philippines now roughly equivalent to other Southeast Asian countries, some Taiwanese firms might decide to postpone their plans to relocate factories there, potentially impacting the local economy in areas where Taiwanese businesses are concentrated.
