US PRESIDENT Donald J. Trump’s proposed tariff on furniture imports won’t be as damaging as the tariff on garments, the Foreign Buyers Association of the Philippines (FOBAP) said.
“Luckily, we have taken all these remedial measures. To us, this threat is not as grave as the threat in the other industries, such as garments,” FOBAP President Robert M. Young said in a phone interview.
“Within the next 50 days, (the US) investigation will be completed, and furniture coming from other countries into the US will be tariffed at a rate yet to be determined,” Mr. Trump said in a social media post.
“This will bring the furniture business back to North Carolina, South Carolina, Michigan, and states all across the Union,” he added.
Mr. Young said Philippine furniture exporters will just need to find other markets for their exports.
“If that happens in 50 days, we will look for other markets. We are already shipping to Russia and to the Middle East now,” he said.
“This is, I think, a good sign for the Philippines that we have developed the furniture business ahead of time by shipping to countries other than the US,” he added.
The difficulty in exporting to the US market includes obtaining forestry certificates, he said.
US business “went down by 50% since the pandemic; it became like $600 million; at present, I think it is less than $300 million,” he said.
“This may still go down because most of the orders were transferred to Indonesia… the Philippines has no wood resources, and we also have the problem with the forestry registration certificate,” he added.
As a result, Philippine furniture manufacturers buy wood and raw materials from Malaysia and Indonesia, piggybacking on the permit of the Malaysian or Indonesian supplier in exporting to the US.
“That is very tedious, so that makes the buyers think (about going directly to) Indonesia,” he said.
“We are not giving up. Of course, America is still a market. So, we will continue,” he added.
INVESTMENTS
Associate Professor of the University of Asia and the Pacific George N. Manzano said US reciprocal tariffs could also impact investment in the Philippines’ exporting industries apart from disrupting trade.
“There is no upside. All the tariffs are up in the US. We have not seen a substantial tariff reduction in any part of the world. This is really a very great disruption,” he said in an interview on the Money Talks with Cathy Yang program on One News.
“More than that, it is not only the increase in tariff but also its effect on investments in the Philippines’ exporting industries, especially if the market is the US,” he added.
He said that if factories choose not to locate in the Philippines because of doubts about market access to the US, the flow of investments might not match the “fervor” of the past.
“This is simply because demand has, by a stroke of a pen, diminished. We only hope that semiconductors will still be accepted because that is really one big chunk of our exports to the US,” he added.
Meanwhile, he said the zero duty on some US goods may result in an increase in the share of US goods in Philippine imports.
However, he said that it will not necessarily translate into higher import bills, as the duty-free entry of US imports will just crowd out other exports to the Philippines.
Aside from merchandise trade, he said a cloud is hanging over business process outsourcing due to artificial intelligence and the proposed Keep Call Centers in America Act.
“So certainly, if the Keep Call Centers in America Act comes to fruition, we expect a lowering of demand for that industry,” he said.
“However, the demand will not be across the board, meaning not all industries will leave the Philippines, because the Act, I think … only affects those US companies that get federal grants or contracts, and those which are private sector-owned firms will be less hit in that sense,” he added.
Nevertheless, he said the law will put pressure on the industry to diversify markets and to upskill. — Justine Irish D. Tabile