Trump–Marcos Jr deal: A blow to the Philippines’ trade and economy, a sell-out to US economic and military interests

[Editor’s note: Filipino socialist activist Merck Maguddayao, from the Partido Lakas ng Masa (Party of the Labouring Masses), will be speaking at Ecosocialism 2025, September 5-7, Naarm/Melbourne, Australia. For more information on the conference visit ecosocialism.org.au.]

President Bongbong Marcos Jr’s recent meeting with US President Donald Trump in Washington on July 22 was focused on tariffs. However, it also involved military deals that seek to advance US imperialism’s agenda.

The tariff deal

The tariff deal is being hailed by Marcos Jr as a “success,” although several trade and economic experts warn it represents a major setback for the Philippines’ economy and sovereignty.

Until last year, Philippine exports to the US enjoyed 0% duties on electronics and only 5–10% on other goods under the rules of the World Treaty Organization (WTO). Now, under the agreement, there will be no tariffs on US products entering the Philippines, but Philippine exports to the US will be slapped with a 19% tariff (down 1% from Trump’s original 20%).

This is not a win for the country — it is a lopsided deal that rewards US suppliers while punishing Philippine exporters.

To illustrate: in 2024, the Philippines imported US$8.85 billion worth of US goods but exported US$12.12 billion worth of Philippine goods, creating a US$3.27 billion trade surplus. That advantage will vanish under the new tariffs that start on August 1 and which will hit all Philippine exports, including electronics, agriculture, garments, etc, making them uncompetitive against suppliers from Vietnam, Malaysia and Mexico.

Impact on electronics

Electronics is the Philippines main export, comprising 61% of the country’s total. The Philippines has a high import dependency on basic components compared to other Global South countries. Local assembly depends on imported wafers, chips and printed circuit boards (PCBs).

In contrast, manufacturing in South Korea, Taiwan, Malaysia and Thailand involves upstream components (including wafer fabrication, semiconductor foundry), midstream assemblies (advanced PCB production, high-value IC packaging) and finished products (smartphones, TVs, auto electronics, and network equipment).

While imports from the US will get cheaper under 0% tariff, exports will cost 19% more — wiping out cost savings and pushing US buyers to other countries. The deal will destroy our remaining competitiveness, and deepen our dependency as a low-value assembly hub on the lowest rung of global electronics production.

Other Philippine exports to the US market will also suffer from higher costs, leading to lower orders and job losses in rural and industrial sectors. This type of tariff deal showcases the government’s unwillingness and gross negligence towards improving the industrial and trade situation in the country.

The electronics industry (like other industries) in the Philippines receives no protection and support from the state. In the countries mentioned above, governments are involved in ownership, policy support and industrial planning. This allows for the kind of industrial development that we do not have — and will not have unless the state takes over major industries. Instead, we have an extreme neoliberal climate when it comes to industrial development.

Trump’s card

Trump is using the tariff card — he called it his “Liberation Day” plan — to balance the US’ trade deficits. His hidden agenda is to curtail China’s cheaper production of goods that compete with the US. The plan is to provide US finished products that are cheaper than rival companies from other countries, especially China.

US electronic components can freely enter the Philippines without tariff, and can therefore dislodge other suppliers because they are cheaper. Trump’s 0% tariff benefits US companies over rivals, especially from China, which is a global leader in the electronics sector.

On the other hand, under this deal, tariffs will kill the Philippines’ only competitive segment, even if it is mainly assembly, and ensure it remains a dependent assembly hub without its own upstream or midstream manufacturing processes.

The hidden agenda

The media has ignored the other agenda item in Marcos’ meeting with Trump. 

Talks also covered an expanded US–Philippine military partnership, including reaffirming the Mutual Defence Treaty of 1951, continuing the positioning of missiles and US military capabilities in the Philippines, undertaking intelligence sharing and cyber defence operations, and strengthening joint maritime and air exercises. There were also talks on the co-production of unmanned systems (aerial/drones, surface and ground vehicles) for military operations.

The US is pushing this to strengthen military-industrial supply chains in the Asia-Pacific, and to build up forward-production capability near strategic zones such as the South China Sea. This will involve partnerships with US companies (such as Lockheed Martin and General Atomics) and Philippine defence firms (such as the hitherto unknown United Defense Manufacturing Corporation or UDMC) to assemble or partially manufacture systems locally.

The UDMC is a Philippine defence contractor, which has been supplying weapons to the Philippine National Police, the Armed Forces of the Philippines (AFP), Coast Guards, and even international partners. It reportedly supplied weapons to the military dictatorship in Myanmar (Burma) during its campaign of genocide against the Rohingya people in 2017.

The Philippines’ defence modernisation program under the AFP’s Horizon 3 (2023-28) is the final phase of the program aimed at building a domestic defence base to reduce dependence on military imports. The US wants its reliable allies to co-produce and maintain equipment.

Constitutional red flag

Also missing from discussion is the issue of the constitutionality of the tariff deal. 

The deal was negotiated at the executive level without treaty ratification by the Senate or enabling legislation from Congress. Article VI, Section 28 (2) of the Philippine Constitution states: “The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates... and other duties or imposts...”

Tariff adjustments are a legislative power delegated to the President only under an enabling law covering tariff and customs code. An executive agreement is usually allowed for minor adjustments or agreements under an existing framework (for example the WTO), but cannot override tariff laws without legal basis.

The US-Philippine tariff deal is not only punitive but raises questions of national interests.

Conclusion

The tariff and military deals underscore the fact that the Marcos Jr government acts in the interests of the US, in the economic and military arenas. The military deal will convert the Philippines into a US proxy in the event of a war with China. 

These deals go against the Philippines’ interests and sovereignty.

A State of the Nation Address is scheduled for July 28. We should raise the US tariff and military deal as issues that demonstrate the government’s culpability in the worsening state of the country through its decision to convert us into an economic and military puppet of US imperialism.

Sonny Melencio is the Chairperson of Partido Lakas ng Masa.