Higher US tariffs and stubbornly high production costs are tightening the vise on Philippine garment exporters, even as shipments are estimated to have topped USD1 billion in 2025.
The Foreign Buyers Association of the Philippines (FOBAP) said the industry is only beginning to feel the full effect of the 19 percent additional reciprocal tariff imposed by the US on Philippine garments, which took effect in August last year.
FOBAP President Robert Young said the group has yet to finalize its 2026 outlook, but early signals from buyers are already sobering.
US customers, who account for the bulk of Philippine apparel exports alongside Canada, are becoming more price-sensitive, Young said, with some shifting orders to rival sourcing hubs.
While the Philippines supplies roughly 10 percent of the purchases of major apparel brands and retailers, it faces fierce competition from Vietnam, a regional powerhouse exporting about USD49 billion worth of garments annually.
Vietnam manages this scale despite facing a 20 percent duty and a hefty 40 percent transshipment tariff, underscoring how cost structure and efficiency can outweigh tariff disadvantages.
At home, the numbers are working against Philippine manufacturers. Labor costs are about 35 percent higher than the regional average, while electricity prices remain among the most expensive in Southeast Asia.
These pressures have pushed free-on-board prices higher and dragged production efficiency down to just 60 to 70 percent, eroding margins in an industry where cents matter.
A deeper structural issue compounds the problem: the absence of a domestic textile industry. Most exporters still rely on imported fabrics, lengthening lead times and inflating costs.
FOBAP has revived its call for the government to spearhead a pilot cotton or denim factory, arguing that localizing key inputs could improve competitiveness and eventually draw investors.
The challenge for policymakers is clear. Without targeted intervention, tariffs may not just bite—they could redraw the Philippines’ place in the global apparel supply chain.
