TAIPEI (Taiwan News) — US President Donald Trump raised tariffs on Philippine exports to 20% on Wednesday, a move that caught Taiwanese business leaders off guard and may deter plans to shift factory operations to the country.

The new rate, up from 17% in April, now matches Vietnam’s and remains lower than Cambodia’s 36% and Malaysia’s 25%, per CNA. However, the change narrows a once-attractive gap that had made the Philippines a viable alternative for Taiwanese manufacturers seeking to diversify away from China.

“More than 80% of Taiwanese businesses in the Philippines serve the domestic market and will not be directly impacted,” said Lin Teng-feng (林登峰), president of Taiwan Association Inc. “But this will make others planning factories there more cautious. It could dampen investment momentum.”

Lin noted that several Taiwanese developers involved in export processing zones may face setbacks, especially if firms decide to pause or cancel relocation plans. He added that uncertainty over new tariffs on China is also keeping manufacturers on hold.

Chang Che-chia (張哲嘉), chair of the Taiwan Chamber of Commerce in Subic Bay, said the Philippines still holds a competitive position in Southeast Asia, but the advantage is slipping. “With the tariff rate now equal to Vietnam’s, the gap has narrowed. Any factory relocations here will likely be modest and focused on risk diversification,” he said.

Chinese overcapacity is another concern. Chang warned that oversupply from China could lead to product dumping in the region, threatening local firms. “If overseas Taiwanese businesses here can’t withstand this wave, they will be eliminated,” he said.