Budget deficit shrinks to PHP 18.9B in July

The national government’s (NG) budget deficit sharply narrowed in July amid the sluggish pace of revenue collection and spending, the Bureau of the Treasury (BTr) said on Thursday.

Data from the BTr showed that the budget gap shrank by 34.42% to PHP 18.9 billion in July from PHP 28.8 billion in the same month a year ago.

Month on month, the fiscal gap plunged by 92.17% from the PHP 241.6-billion deficit in June.

In July, revenues went up by 3.26% to PHP 472.3 billion from PHP 457.4 billion in the same month last year, as higher tax collections offset the decline in nontax revenues.

Tax revenues, which made up the bulk of revenue collections, jumped by 5.01% to PHP 423 billion in July from PHP 402.8 billion in the same month in 2024.

Collections by the Bureau of Internal Revenue (BIR) rose by 4.83% to PHP 335.3 billion in July from PHP 319.8 billion a year ago. This included a PHP 3.8-billion tax refund.

“The BIR sustained its strong performance due to higher revenues from corporate income tax. This was followed by personal income tax, tax on government securities, excise tax on tobacco products, percentage tax on banks and fi-nancial institutions, and documentary stamp tax,” the BTr said.

Collections by the Bureau of Customs (BoC) increased by 6% to PHP 85.2 billion, net of a PHP 256-million tax refund, while other offices’ revenues fell by 3.47% to PHP 2.6 billion.

The BTr attributed the higher Customs revenue to the 12.69% year on year increase in excise tax collections, as well as the 6.13% rise in value-added tax collections.

On the other hand, nontax revenues slid by 9.66% to PHP 49.3 billion in July from PHP 54.6 billion in the same month in 2024, mainly due to the 62.6% plunge in collections by other offices to PHP 13 billion.

However, this was offset by the 82.42% surge in Treasury income to PHP 36.3 billion in July from PHP 19.9 billion a year ago. This was attributed to strong dividend remittances, interest income on NG deposits, and NG share from Manila International Airport Authority’s profits.

Meanwhile, government spending inched up by 1.02% to PHP 491.2 billion in July from PHP 486.2 billion in the same month in 2024.

The BTr said the increase was driven by higher National Tax Allotment releases to local government units, the Annual Block Grant to the Bangsamoro Autonomous Region in Muslim Mindanao, interest payments and personnel services expenditures.

“Spending in July was weighed down by the timing of big-ticket disbursements of the Department of Public Works and Highways, Department of Social Welfare and Development, and Department of National Defense for their respective banner programs,” it said.

Primary expenditure (net of interest payment) fell by 5.36% to PHP 385 billion in July, while interest payments went up by 33.72% to PHP 106.2 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the narrower fiscal deficit in July to a deceleration in overall government spending.

“The narrower budget deficit sends a positive signal for fiscal and debt management,” he said in a Viber message.

7-month deficit

In the first seven months of the year, the NG budget deficit ballooned by 22.04% to PHP 784.4 billion from the PHP 642.8-billion gap last year, as expenditure growth outpaced revenues.

The BTr said the budget deficit was on track to hit the revised PHP 1.56-trillion full-year deficit ceiling.

“This performance underscores the government’s commitment to support economic development while keeping within the bounds of prudent fiscal management,” it said.

State spending rose by 8.22% to PHP 3.52 trillion in the January-to-July period. This was already 57.82% of the P6.08-trillion revised full-year expenditure program.

Primary expenditures rose by 7.26% to PHP 2.99 trillion as of end-July, while interest payments went up by 14.1% to PHP 521 billion.

On the other hand, total revenue collection during the January-to-July period increased by 4.82% to PHP 2.73 trillion from PHP 2.61 trillion in the same period last year. The BTr said the cumulative collection was 60.45% of the PHP 4.52-trillion revised full-year program.

Tax revenues rose by 9.71% to PHP 2.46 trillion as of end-July, which was already 58.27% of the PHP 4.21-trillion target.

BIR collections stood at PHP 1.89 trillion, up 12.34% as of end-July, driven mainly by increases in corporate income tax, value-added tax, and personal income tax. This was 58.68% of the BIR’s PHP 3.22-trillion full-year target.

Customs collection inched up by 1.51% to PHP 544 billion as of end-July. This was 56.74% of the revised PHP 958.7-billion program for the year.

Nontax revenues plunged by 24.88% to PHP 277 billion for the first seven months of the year, largely due to the base effect of non-recurring large dividend remittances in 2024. It accounted for 91.87% of the PHP 301.5 billion-full-year nontax revenue program.

Treasury income dipped by 1.21% to PHP 181.6 billion as of end-July, while other offices’ income slumped by 48.41% to PHP 95.4 billion.

Mr. Ricafort said the narrower budget deficit reduces the urgency for more borrowings, implementing new taxes and raising tax rates.

The NG deficit ceiling is set at PHP 1.56 trillion this year, equivalent to 5.5% of gross domestic product (GDP). This is projected to decline to PHP 1.55 trillion, or 4.3% of GDP, by 2028. — Aubrey Rose A. Inosante, Reporter

Philippines seeking US tariff exemptions for selected exports

The Philippines is asking the US to exempt exports of agricultural products and other goods from the 19% tariff imposed by US President Donald J. Trump, a Trade official said on Thursday.

Trade Undersecretary Allan B. Gepty said the government is seeking US tariff exemptions for exports of agricultural commodities, electronics, vehicle tires, bags and aircraft parts.

“We submitted a list of products we asked the US to exempt from the imposed tariff rates, because these are key and complementary items. And some of them, in fact, are not even produced or manufactured there (in the US),” he told senators at a Senate briefing on the tariff set by Washington on Philippine exports.

“The immediate need right now is we want to negotiate for an exemption, because we want to protect our industries whose main export market is the US,” he added.

The US began imposing a 19% tariff on Philippine goods starting Aug. 7.

“We already submitted to the US the products that should be exempted from the reciprocal tariffs,” he said.

Mr. Gepty said about 23% of the country’s total exports to the US are exempted from the 19% tariff.

In June, the United States was the top destination for Philippine-made goods amounting to USD 1.22 billion, 35.2% higher from the same month a year ago.

Around 53% of the Philippines’ total exports to the US were semiconductors and electronics, Mr. Gepty said.

The US has yet to set new global tariffs for semiconductors and pharmaceuticals. Mr. Trump had earlier said he plans to announce higher tariffs on imports of semiconductors, but companies that plan to build manufacturing facilities in the US would be exempted.

“Ninety-nine percent of our semiconductors as of now are still exempted, there’s still no problem” he said. “If the 100% continues, that’s a big problem,” he added.

Mr. Gepty said most of the semiconductors are made by US companies in the Philippines and exported to the US. He noted the higher tariffs would pose problems for the US supply chain, particularly for its defense industry.

Meanwhile, the Philippines has not formally granted zero tariffs on US products, as negotiations over a reciprocal trade agreement remain ongoing, he said.

“We have not yet concluded and signed [any deal].”

Senator Maria Imelda “Imee” R. Marcos said that any trade deal with the US should undergo a Senate review, citing concerns it could be lopsided and pose risks to domestic industries.

“[Based on] the scant information that we have been provided, it’s clearly more onerous upon the Philippines and extremely beneficial to the US,” she said. “There is even more reason that this agreement should be submitted for the concurrence of the Senate.”

Mr. Trump said in July that the Philippines is “going to open market with the United States, and zero tariffs,” following his meeting with President Ferdinand R. Marcos, Jr. in Washington.

Also on Thursday, Department of Economy, Planning, and Development Undersecretary Rosemarie G. Edillon said the effects of US tariffs on Philippine exports could lead to modest medium-term gains through trade diversion.

However, the US tariffs are projected to trim 0.013% from the country’s gross domestic product by next year, she added.

“If we manage the transition well, then we think that… in the medium term, it could have positive effects by virtue of trade diversion,” she said. “It’s minus 0.013% from the baseline, and this is equivalent to USD 70 million in the short term.”

The impact of the US tariff was partly mitigated as the Philippines is not a major exporter, she said.

Meanwhile, US tariffs could help ease inflationary pressures in the country, as trade disruptions slow global economic activity and dampen demand, Bangko Sentral ng Pilipinas Deputy Governor Zeno Ronald R. Abenoja said.

“In the near term, because of the moderation of economic activity both globally and possibly the domestic economy, this could lessen pressures on the inflation rate right now,” he said. “We are seeing inflation rate below 2% on average for 2025.” — Kenneth Christiane L. Basilio, Reporter

Stocks sink on selling pressure before BSP cut

Philippine stocks dropped anew on Thursday, with the main index sliding back to the 6,100 level, as investors pocketed their gains before the Bangko Sentral ng Pilipinas (BSP) delivered a widely-expected rate cut.

The Philippine Stock Exchange index (PSEi) fell by 1.32% or 83.15 points to close at 6,190.19, while the broader all shares index dropped by 0.75% or 28 points to 3,703.07.

“Investors booked gains from yesterday’s rally, taking a cautious stance while waiting for clues on the Bangko Sentral ng Pilipinas’ policy outlook from their latest meeting,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

“The peso’s weak position against the dollar also weighed on the market this Thursday.”

The BSP on Thursday cut benchmark interest rates by 25 basis points (bp) to bring its policy rate to 5%, as expected by all 20 analysts in a BusinessWorld poll. This was its third straight 25-bp cut since April.

It has now lowered borrowing costs by a cumulative 150 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. said in a briefing that the key rate is now at the “sweet spot” in terms of inflation and output.

He added that they could consider further policy loosening if the economy weakens “considerably,” with one more cut still possible this year that could mark the end of its current easing cycle.

Earlier, the BSP chief signalled that more reductions could be on the table until next year.

“The market faced some selling pressure,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message. “But now, attention shifts to how investors will react to the BSP’s 25 bps rate cut and its implications for equity prices, especially as yields continue to decline while the inflation outlook of the central bank remains steady at 1.7% by yearend.”

Almost all sectoral indices closed lower on Thursday. Financials retreated by 2.41% or 51.21 points to 2,073.60; property went down by 1.45% or 36.30 points to 2,467.88; services sank by 1% or 22.47 points to 2,214.59; holding firms decreased by 0.67% or 34.54 points to 5,122.49; and industrials declined by 0.23% or 21.53 points to 9,111.48.

Meanwhile, mining and oil rose by 0.45% or 44.41 points to 9,864.23.

“ACEN Corp. was the day’s index leader, climbing 3.21% to PHP 2.25. BDO Unibank, Inc. was the worst index performer, dropping 3.35% to PHP 135.50,” Mr. Tantiangco said.

Value turnover dropped to PHP 7 billion on Thursday with 953.32 million shares traded from PHP 8.65 billion with 890.43 million shares exchanged on Wednesday.

Advancers and decliners were evenly split at 99 each, while 48 names were unchanged.

Net foreign selling increased to PHP 769.82 million on Thursday from PHP 41.42 million on Wednesday. — Revin Mikhael D. Ochave

Peso strengthens vs dollar on BSP rate cut, dovish Fed bets

The peso rose slightly against the dollar on Thursday after the Bangko Sentral ng Pilipinas (BSP) delivered a widely-expected rate cut and amid dovish expectations for the US central bank’s easing cycle.

The local unit closed at PHP 57.12 per dollar, strengthening by four centavos from its PHP 57.16 finish on Wednesday, Bankers Association of the Philippines data showed.

The peso opened the session sharply higher at PHP 57.05 against the dollar. Its intraday best was at PHP 56.93, while its worst showing was at PHP 57.17 versus the greenback.

Dollars exchanged went down to USD 1.86 billion on Thursday from USD 1.9 billion on Wednesday.

“The dollar-peso closed a tad lower because the BSP delivered a rate cut. But profit taking ensued because the market is awaiting US PCE (personal consumption expenditures) data,” a trader said in a phone interview.

The BSP on Thursday cut its target reverse repurchase rate by 25 basis points (bps) to 5%, as expected by all 20 economists in a BusinessWorld poll conducted last week. Rates on the overnight deposit and lending facilities were likewise lowered by 25 bps to 4.5% and 5.5%, respectively.

This marked the third straight 25-bp reduction since April. Since starting its easing cycle in August 2024, the BSP has now slashed borrowing costs by a cumulative 150 bps.

The dollar was also generally weaker on Thursday amid dovish signals from US Federal Reserve officials, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Friday, the trader sees the peso moving between PHP 56.90 and PHP 57.30 per dollar, while Mr. Ricafort expects it to range from PHP 57 to PHP 57.2.

The dollar was little changed on Thursday as traders added to bets for a Federal Reserve interest rate reduction next month after New York Fed chief John Williams signalled a cut was possible, Reuters reported.

The US currency has been under renewed pressure from President Donald J. Trump’s ramped-up campaign to exert more influence over monetary policy decisions, as he attempts to fire Fed Governor Lisa Cook and replace her with a loyalist.

The dollar flattened against the euro even after France’s prime minister on Monday unexpectedly called a confidence vote for next month, which is likely to result in the fall of his minority government.

The Fed’s Mr. Williams said in an interview with CNBC on Wednesday that it is likely interest rates can fall at some point, but policymakers will need to see what upcoming data indicate about the economy to decide if it’s appro-priate to make a cut at the Sept. 16-17 meeting.

Key among data releases before that meeting are the PCE price index on Friday — the Fed’s preferred inflation measure — and the monthly payrolls report a week later.

Traders currently lay around 89% odds of a quarter-point rate cut next month, and have priced in a cumulative 55 bps of easing by yearend, according to LSEG data.

That helped send two-year Treasury yields, which are sensitive to policy expectations, sliding to the lowest level since May 1, adding to pressure on the dollar.

Mr. Trump’s push to place hand-picked, dovish-leaning candidates into the central bank’s decision-making committee also pulled short-term yields lower, even though his attack on Ms. Cook could spark a protracted legal battle after she sued to keep her job.

“Short-dated US yields remain near their recent lows, and most would conclude that this week’s (attempt to remove) Fed’s Lisa Cook by President Trump is dollar-negative,” said Chris Turner, global head of markets at ING.

The dollar index, which gauges the currency against six major peers, edged 0.1% higher at 98.225, following two days of declines.

The euro was little changed, down 0.07% at USD 1.1630.

Against the yen, the dollar slipped 0.03% to 147.34 yen.

Japan’s chief trade negotiator Ryosei Akazawa canceled a trip to Washington at the last minute on Thursday, delaying an announcement of the details of Japan’s USD 550-billion investment pledge in the United States as part of a tariff deal.

A government spokesperson said the decision was taken after talks with the US side revealed some points that need further discussion “at the administrative level.”

The dollar slipped to its lowest level against China’s offshore yuan since November, last down 0.2% to 7.1360 yuan in offshore trading. — A.M.C. Sy with Reuters

Local automakers interested in RACE program

Local automakers have also expressed interest in participating in the Revitalizing the Automotive Industry for Competitiveness Enhancement (RACE) program, the Department of Trade and Industry (DTI) said.

At a budget hearing on Wednesday, Trade Secretary Ma. Cristina A. Roque said that the new auto revival strategy has yet to be implemented.

“We want more companies to avail. Francisco Motors and other local companies have also expressed their interest to avail of this program,” she said.

“It is open to everyone. And the bottomline is, if they can [manufacture] 100,000 units in three years, then they will be able to avail of the incentives,” she added.

She said that the government is aiming to fast-track the release and the implementation of the joint administrative order that will govern the strategy.

“There are other departments involved, so it really needs to be cleared first by all the departments, and then from there, we will roll out,” she said.

“There’s no timeline yet, but we are fast-tracking it so that more players can join,” she added.

Aside from the DTI, the other departments involved in the RACE program are the Department of Finance and the Department of Budget and Management.

According to the secretary, the program will be open to as many players as possible, unlike its predecessor program, the Comprehensive Automotive Resurgence Strategy (CARS), which only had three slots.

“We already discussed this with different companies and stakeholders that may want to avail of this program,” Ms. Roque said.

Aside from local players, other companies that have expressed interest in participating in the RACE program are Toyota Motor Philippines Corp. and Mitsubishi Motors Philippines Corp. Both Toyota and Mitsubishi were also participants in the CARS program.

In the National Expenditure Plan, the RACE program is provided with a budget of P250 million, while fiscal support arrearages for CARS are valued at around P225 million.

However, these programs faced closer scrutiny from lawmakers, who were concerned that foreign manufacturers benefit more than local manufacturers.

“Instead of funding local industries using taxes paid by citizens, why are we funding industries or foreign companies that are already successful,” Kabataan Party-list Rep. Renee Louise M. Co said in Filipino during the hearing.

In response to this, Ms. Roque said that the strategies emphasize the need for the automakers to support the local industries.

“Parts of the car must come from local industries… In the RACE program, part of the requirement is for them to buy a certain percentage of the parts from the local manufacturers, and that is their contribution to the industry,” she said.

Similar incentives

Board of Investments (BoI) Executive Director Fe L. Del Rosario said that the government will still provide the same incentives under the RACE program, which include the fixed investment support (FIS).

“More or less for the RACE, it will have the same incentives, but in terms of volume requirements per model, it will be lower,” she said, noting that the requirement was 200,000 under the CARS program.

“In the RACE program, we [will] actually provide so-called FIS, which is equivalent to not more than 40% of capital expenditure in the form of tax certificates,” she added.

However, Ms. Del Rosario said that the FIS will not be automatically given, as there is a committee that will evaluate the claims of the company according to the guidelines.

The same provision is also present in the CARS program, where Mitsubishi and Toyota are expected to receive PHP 484 million and PHP 1.3 billion in FIS.

“The amount in the budget referring to the arrearages is the one that will cover these unpaid FIS,” said Ms. Del Rosario.

However, she said that the BoI is currently conducting an audit on the claims in terms of what was approved and what should be paid to the companies.

“Once our audit is done, the P225 million should cover the claim of the companies, whatever it can cover,” she added.

Deputy Minority Leader Antonio L. Tinio, however, raised the issue of whether the government should include technology transfer requirements in the strategy.

“In other countries like India, Indonesia, and Malaysia, they invite the foreign manufacturers, but the requirement is at some point the technology can be used by their own people,” he said.

In response, the DTI stated that it is open to studying technology transfer provisions that would benefit local manufacturers in the strategy. — Justine Irish D. Tabile, Reporter

BSP adopts new format for policy announcements

The Bangko Sentral ng Pilipinas (BSP) will start implementing a new format for communicating monetary policy decisions starting Aug. 28, as part of efforts to increase transparency.

In a statement, the BSP said it will release its statement on monetary policy on its official website and its official X account at 2:30 p.m.

This will be followed by a press briefing at 3 p.m., which will be livestreamed on the BSP’s official Facebook page.

The briefing will begin with a statement to be read by BSP Governor Eli M. Remolona, Jr. and followed by a question-and-answer session with members of the media.

“This is part of the BSP’s efforts to further strengthen transparency and public appreciation of monetary policy actions,” the central bank said.

Prior to the change, the Monetary Board’s (MB) monetary policy decision was announced by the BSP governor at a 3 p.m. briefing.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the new format is a “positive move toward greater market transparency and responsiveness.”

He noted that it would allow market players to react to the Monetary Board’s stance in real-time, leaving less room for uncertainty and speculation.

“This also aligns the BSP with global best practices among central banks that time their announcements to maximize market guidance while minimizing volatility,” Mr. Rivera said in a Viber message.

“It signals confidence in its policy communication and enhances its signaling power, especially in times of heightened market sensitivity,” he added.

The BSP’s new format is similar to the US Federal Reserve’s format.

The Federal Open Market Committee releases a statement at 2 p.m. Eastern Time on the final day of its two-day meeting. The Fed Chair holds a press conference around 30 minutes after the statement is released.

The MB will hold its policy review today (Aug. 28), where it is widely expected to deliver a 25-basis-point rate cut. If realized, this would bring the benchmark rate to 5% from the current 5.25%. — KKC

Peso hits 3-week low ahead of BSP review

The peso dropped to a three-week low against the dollar on Wednesday before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, where it is expected to cut benchmark rates further.

The local unit closed at PHP 57.16 per dollar, down by nine centavos from its PHP 57.07 finish on Tuesday, Bankers Association of the Philippines data showed. This was the peso’s worst finish since it ended at PHP 57.475 on Aug. 6.

The peso opened the session stronger at PHP 56.93 against the dollar, which was also its intraday high. Meanwhile, it hit a low of PHP 57.23 against the greenback.

Dollars exchanged rose to USD 1.9 billion on Wednesday from USD 1.44 billion on Tuesday.

“The US dollar-peso exchange rate corrected slightly higher… partly due to the widely expected 25-basis-point (bp) BSP rate cut tomorrow (Aug. 28) that would bring the interest rate differential between BSP and Federal Reserve rates to 50 bps, the narrowest on record,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort via Viber.

The peso weakened as “dollar demand was fueled by reports saying that Fed Governor Lisa Cook filed a lawsuit that challenged her removal from office,” a trader said by phone.

For Thursday, the trader sees the peso moving between PHP 56.90 and PHP 57.30 per dollar, while Mr. Ricafort expects it to range from PHP 57 to PHP 57.25. — A.M.C. Sy

Philippine shares rebound before BSP policy meeting

Stocks rebounded on Wednesday on bargain hunting before the Bangko Sentral ng Pilipinas’ (BSP) widely expected rate cut on Thursday.

The bellwether Philippine Stock Exchange index (PSEi) jumped by 2.08% or 128.10 points to end at 6,273.34, while the broader all shares index went up by 1.26% or 46.52 points to close at 3,731.07.

“The local market bounced back this Wednesday fueled by bargain hunting. Hopes of a Bangko Sentral ng Pilipinas rate cut in their upcoming Monetary Board meeting this week also helped in the rebound,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

“The market saw buyers take charge today after yesterday’s dip,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message. “Investors likely viewed yesterday’s prices as a bargain buying opportunity, pushing prices and the market higher together with investors positioning for the upcoming BSP meeting.”

All 20 analysts in a BusinessWorld poll expect the Monetary Board to reduce the policy rate by 25 basis points (bp) to 5% at its meeting on Thursday.

This would be the BSP’s third consecutive 25-bp cut since April. It has lowered benchmark interest rates by a total of 125 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. earlier said a cut is “quite likely” at this week’s meeting and another reduction is also on the table for the remainder of the year as inflation is likely to stay within the 2-4% annual target.

After Thursday’s review, the Monetary Board’s remaining meetings for this year are scheduled for Oct. 9 and Dec. 11.

Inflation sharply eased to a near six-year low of 0.9% in July from 1.4% in June, bringing the seven-month average to 1.7%, a tad higher than the central bank’s 1.6% forecast but below its 2-4% target.

Almost all sectoral indices closed in the green on Wednesday. Services surged by 3.96% or 85.37 points to 2,237.06; financials jumped by 3.52% or 72.41 points to 2,124.81; property increased by 2.71% or 66.15 points to 2,504.18; mining and oil climbed by 2.41% or 231.08 points to 9,819.82; and industrials rose by 0.32% or 29.84 points to 9,133.01.

Meanwhile, holding firms dropped by 0.51% or 26.76 points to 5,157.03.

“International Container Terminal Services, Inc. was the top index gainer, jumping 7.02% to PHP 485. Aboitiz Equity Ventures, Inc. was the main index laggard, falling 3.4% to PHP 29.80,” Mr. Tantiangco said.

Value turnover fell to PHP 8.65 billion on Wednesday with 890.43 million shares traded from PHP 14.32 billion with 1.55 billion shares exchanged on Tuesday.

Advancers bested decliners, 117 versus 100, while 39 names closed unchanged.

Net foreign selling decreased to PHP 41.42 million on Wednesday from PHP 2.04 billion on Tuesday. — Revin Mikhael D. Ochave

Philippines may see more tariffs as Trump floats digital taxes

The Philippines may face additional tariffs after US President Donald J. Trump’s fresh tariff threat against countries that impose digital taxes on US technology companies, analysts said.

In a post on Truth Social, Mr. Trump threatened countries that have digital taxes with “substantial additional tariffs” on their exports to the US if they do not remove these laws.

“With this truth, I put all countries with digital taxes, legislation, rules, or regulations, on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional tariffs on that country’s exports to the USA, and institute export restrictions on our highly protected technology and chips,” Mr. Trump said.

The Philippines, which began enforcing its digital tax law in June, may be among the countries facing additional US tariffs.

“Likely to have an impact on us since we impose 12% VAT (value-added tax) on digital services,” Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes said in a Viber message.

Republic Act No. 12023 imposes a 12% VAT on nonresident digital service providers such as Netflix, Amazon, and Google. The law aims to level the playing field between local and foreign digital platforms.

“This could be part of Trump’s reciprocal tariffs on digital transactions that are taxed by different countries around the world, especially by developed countries,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“So, there is a risk of retaliatory US tariffs in the country (Philippines), though the effect could still be minimal or negligible,” he added.

Mr. Peña-Reyes warned that the US may hike the current 19% tariff on Philippine goods since Mr. Trump remains “unpredictable.”

The US began imposing a 19% tariff on Philippines goods on Aug. 7.

Mr. Ricafort said the US president could still try to get concessions in terms of reduced digital transaction taxes for US companies as part of the trade negotiations.

Mr. Trump in February signed a memorandum to combat the digital service taxes imposed by foreign governments on American companies.

The directive renewed the digital service tax investigations that were initiated during Mr. Trump’s first term while also investigating additional countries that use digital service tax.

Analysts cautioned the Philippine government against hastily lifting the VAT on US technology firms.

“(This is) something the government should study and weigh carefully — revenues lost from lifting tax versus revenues from lower exports due to higher tariff,” Mr. Peña-Reyes said.

The Department of Finance has estimated that the government will generate P102.12 billion in revenue from digital VAT collections between 2025 and 2028.

“It’s hard to be optimistic that the trade benefits we may get from lifting taxes will be greater than the impact of additional revenues we may get from taxes which, if used correctly, may help in developing industries through government support and additional incentives,” Matt Reinielle M. Erece, an economist at Oikonomia Advisory and Research, Inc., said.

Asian Consulting Group Founding Chairman and Chief Tax Advisor Raymond A. Abrea said that the Philippine law is not solely targeted at US tech giants, “but reflects a broader global move to modernize tax systems in the digital age.”

“The Philippines did not create a separate digital tax. We simply expanded VAT to include online transactions and digital service providers, ensuring fairness between traditional and digital businesses,” Mr. Abrea said in a Viber message.

Mr. Trump had claimed these digital taxes were “designed to harm, or discriminate against American technology,” while giving a pass for Chinese firms.

Meanwhile, Mr. Erece said the threat of additional tariffs poses risks to the country’s export sector and broader economic performance.

“Therefore, the country must do two things: continue close but persistent trade negotiations with the US but also be aggressive in supporting and incentivizing exporting industries to develop competitive goods that remain attractive to foreign consumers despite tariffs being in place,” he said.

Philippine Chamber of Commerce and Industry Chairman George T. Barcelon said that businesses are in a wait-and-see stance until the new tariffs are clarified.

“We are taxing services that come from the US, like a lot of software platforms. Even if it’s on the cloud, on a prescription basis, now, there’s already a VAT,” Mr. Barcelon said in a phone interview.

“I do not know whether that translates to the fact that President Trump will impose their version of a tax on our exports. But it sounds like that will be the effect,” he added.

Meanwhile, the 19% US tariff is expected to have a smaller impact on the Philippine economy than previously expected, Fitch Solutions’ unit BMI said.

“We estimate that the revised tariff rate will lead to a 0.4-percentage-point (ppt) reduction in output over the medium term, a significant improvement from the 1.4-ppt decline we estimated in April,” BMI said in a report.

BMI said it maintained its full-year gross domestic product (GDP) growth forecast for the Philippines at 5.4% as it expects global economic conditions to deteriorate in the second half when US tariffs take effect.

BMI’s forecast is below the government’s 5.5-6.5% GDP growth target for the year.

“The Philippines remains a largely domestically driven economy. While interest rates have eased considerably from their peak, erratic US trade policies will weigh on global investor sentiment and limit foreign direct investment inflows,” BMI said.

“As such, we see little prospect for a meaningful investment recovery in the near term. Household consumption is showing similar weakness. Import volumes — a reliable proxy for private spending — continue to contract sharply and recent consumer surveys suggest confidence has eroded further as trade tensions escalate,” it added. — Aubrey Rose A. Inosante and Justine Irish D. Tabile, Reporters with K.K.Chan

Peso weakens on Fed concerns

The peso dropped against the dollar on Tuesday as US President Donald J. Trump’s move to fire a Federal Reserve official sparked renewed concerns over the central bank’s independence.

The local unit closed at PHP 57.07 per dollar, weakening by 12 centavos from its PHP 56.95 finish on Friday, Bankers Association of the Philippines data showed.

The peso opened the session stronger at PHP 56.70 against the dollar. Its intraday best was at PHP 56.65, while its worst showing was at PHP 57.10 against the greenback.

Dollars exchanged went down to USD 1.44 billion on Tuesday from USD 1.7 billion on Friday.

Philippine financial markets were closed on Monday due to a holiday.

The peso weakened “amid concerns over the independence of the US central bank after Trump fired Fed Governor Lisa Cook,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar steadied later in the session after a volatile start on Tuesday as Mr. Trump’s unprecedented move to fire Ms. Cook renewed concerns over the central bank’s independence, Reuters reported.

The dollar index, which measures the US currency against six others, was flat at 98.42, recovering from a fall of as much as 0.4% after Mr. Trump made the announcement in a letter to Ms. Cook that he posted on social media.

The move marks a sharp escalation of Mr. Trump’s battle against the Fed. The president has repeatedly berated Fed Chair Jerome H. Powell for not lowering interest rates, though has stopped threatening to fire him ahead of the end of his term in a little under nine months.

In the letter, Mr. Trump said he was firing Ms. Cook over alleged improprieties in obtaining mortgage loans. In response, Ms. Cook said Mr. Trump has no authority to fire her from the central bank, and she will not resign.

Money markets are currently pricing in a near 82% probability of a rate cut at the Fed’s September meeting.

Meanwhile, a trader said the peso tracked the decline of most currencies against the dollar on Tuesday.

“Furthermore, importer demands also could have strengthened last minute, further compounding the peso’s depreciation,” the trader added.

For Wednesday, Mr. Ricafort sees the peso moving between PHP 56.95 and PHP 57.20 per dollar. — A.M.C. Sy with Reuters

2024 Mid-Year Economic Briefing: Navigating the Easing Cycle

Investing with Love: A Mother’s Guide to Putting Money to Work

Investor Series: An Introduction to Estate Planning

Policy rate views: Fed expected to do baby steps

Inflation Update: Faster but full-year average within target