Foreign Buyers Association of the Philippines head Robert Young. — Bloomberg
MANILA: When US President Donald Trump set a 19% tariff on exports from the Philippines last July, its key body representing foreign buyers of apparel, including Walmart Inc and Neiman Marcus Group LLC, pledged to shift gear and focus on other destinations such as the Middle East and Europe.
Six months on, it’s becoming evident how difficult that transition is to make.
For the Foreign Buyers Association of the Philippines, the United States remains a critical market, accounting for between 80% to 85% of its business, despite a push to move up the value chain and branch into new geographies.
Garment sales this year to overseas buyers are predicted to be around US$1bil, largely in-line with 2025, because other nations can’t rival US demand.
“We’re exploring other markets that could pay better,” association head Robert Young said in an interview.
“They’re interested, however, the volume, they cannot match the United States. In the export business, you have to have volume.”
Long-standing relationships built over decades with US clients have helped to soften the blow, however.
Young said several large US buyers have agreed to either fully shoulder the 19% levy or at least share the load 50:50 but those agreements aren’t necessarily permanent.
With higher input costs like power, logistics and labour making clothes made in the Philippines are about 15% more costly than in places like Vietnam, India and China.
Young said his group is working with manufacturers to move away from mass produced, lower-end garments.
The Philippines has “about the third most-expensive labour costs in Asean. In power costs, we’re one of the highest,” Young said.
“Also our productivity is becoming lower and lower due to other countries being mechanised.
“We don’t have the machines due to a lack of capital. Those things can be solved by the government, but there’s a little bit of neglect.”
Most large-scale textile mills in the nation closed years ago due to high operational costs and Young said there isn’t enough political will from Philippine President Ferdinand Marcos Jr’s government to reinvest in the sector.
Garment factories have been going out of business too – at the end of last year, Charter Link Clark Inc, a supplier for Lululemon Athletica Inc operating in the Clark Freeport Zone north of Manila, closed its doors, laying off some 500 workers.
Sourcing denim from China and South Korea, and cotton from India, Pakistan and Turkiye, the Foreign Buyers Association is encouraging factories to lean into clothes with greater detailing and higher-end finishes, like hand embroidery and beading, to boost margins and reach new buyers. — Bloomberg
