Trade deficit narrows to $4.05 billion in January

By Matthew Miguel L. Castillo, Researcher

The country’s trade-in-goods deficit narrowed by 17.8% year on year in January as exports growth moderated while imports declined, the Philippine Statistics Authority reported on Friday.

Preliminary data from PSA showed trade balance in goods — the difference between the values of merchandise exports and imports — reached a $4.05-billion deficit that month, narrower than the $4.93-billion gap recorded in January last year.

Month on month, January’s trade deficit widened from the revised $3.99-billion gap logged in December 2025.

The country’s trade balance has been in deficit for over a decade or since it posted a $64.95-million surplus in May 2015.

Cid L. Terosa, a senior economist at the University of Asia and the Pacific, said that the narrower annual trade deficit in January was due to muted import growth.

“While the global trade environment fostered caution and hesitation among importers, the weak domestic economic environment held back stronger demand for capital goods and imports,” Mr. Terosa said in an e-mail.

“The continued use of tariff threats by the US against China, Europe, Canada, and other countries dimmed export prospects in January 2026,” he added.

Outbound shipment of locally made goods grew by 7.9% year on year to $7.09 billion in January, slowing down from the 9.6% expansion in the same month last year. It was the slowest annual export pace in five months or since the 5.5% growth in August 2025.

By value, export receipts in January were the largest in three months or since the $7.45 billion logged in October last year.

Imports, meanwhile, ended two straight months of growth as it fell by 3.1% year on year to $11.14 billion in January. This marked its worst annual decline in 14 months or since imports dropped by 3.3% in November 2024.

Import value that month is also the largest in three months or since the $11.64 billion October a year ago.

On Jan. 14, US President Donald J. Trump imposed a 25% tariff on chips used for artificial intelligence (AI), Reuters reported.

Three days later, amid escalating exchanges with European allies, Mr. Trump threatened to let loose a wave of tariffs on the bloc until the US buys Greenland.

ELECTRONIC PRODUCTS DRIVE EXPORT
“Robust external demand for electronic products — particularly semiconductors driven by surging AI-related needs — continued to underpin overall export growth [in January],” Chinabank Research said in a note.

Manufactured goods comprised more than three-fourths of all exports in January with a value of $5.63 billion, growing by 6.6% from $5.28 billion last year.

Electronic products, which cornered more than 70% of manufactured goods and more than half of January’s total exports, expanded by 18.8% year on year to $4.01 billion.

Semiconductors, which accounted for the bulk of electronic products and more than 40% of total exports, climbed by 21.6% to $3.07 billion in January.

The United States was the main destination of locally made goods in January as exports to the country reached $1.16 billion, accounting for 16.4% of all outbound goods.

It was followed by Hong Kong with $1.12 billion (15.9% share), Japan with $879.73 million (12.3% share), China with $691.80 million (9.8% share), and South Korea with $391.75 million (5.5% share).

Despite the familiar set of export destination countries, Chinabank Research also noted significant growth in exports to the East Asia and European Union economic blocs which reached 22.5% and 11.8% in the month, respectively.

“Renewed uncertainty in US trade policy may further encourage exporters to diversify away from the US market,” it added.

SOFT DEMAND FOR IMPORTS
Raw materials and intermediate goods, which made up the bulk of the country’s import bill (34.7% share), dropped by 8% to $3.87 billion in January.

Capital goods, which accounted for 33.9% of the country’s imports, rose by 16% to $3.77 billion.

Imports of consumer goods, meanwhile, fell by 6.2% to $2.24 billion. Mineral fuels, lubricants and related materials also contracted by 25% to $1.21 billion.

By commodity group, importation of electronic products, which accounted for more than a fourth of total bill in January, went up by 18.6% to $2.99 billion.

Imports of semiconductors jumped by 28.1% to $2.15 billion in January.

China was the top source of imported goods with 29.2% share worth $3.26 billion. South Korea followed with an 11.2% share ($1.25 billion), Japan with 8.3% ($928.05 million), Indonesia with 7.1 ($790.47 million), and the United States with 5.9% ($635.25 million).

WHAT’S NEXT
For the next months, Mr. Terosa expects the country to take advantage of the lower global tariffs imposed by Mr. Trump.

“Since the global tariff rate at 10% is lower than the rate set last year, I expect exporters to aggressively push exports in global markets,” he said.

After the US Supreme Court struck down his previous tariff program, Mr. Trump slapped a new 10% tariff on all imports for 150 days last week, Reuters reported. Less than 24 hours later, said he plans to raise this blanket tariff to 15%.

Mr. Trump in July last year imposed a 19% duty on goods from five Southeast Asian countries — the Philippines, Cambodia, Malaysia, Thailand, and Indonesia.

“During this window, US importers may opt to front-load their orders, especially given President Trump’s threat to raise import duties to 15%,” Chinabank Research said.

On the other hand, Sergio Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc., said that the new tariffs place the country and the globe under a renewed “period of uncertainty.”

“We are in limbo… we do not know what will happen in 150 days, whether the rate will be returned to 19% or set to 15% eventually,” Mr. Ortiz-Luis said in a phone call.

Despite the uncertainty, Mr. Ortiz-Luis said that the government targets for imports and exports growth remain within reach.

The government’s Development Budget Coordination Committee expects exports and imports to grow by 2% this year.

He also forecasted the continuing trend of narrowing trade gaps for the months to come.

Moving forward, Mr. Terosa said that export growth may be maintained above target by reducing both market and commodity concentration.

“Changes in the global trade environment have made it necessary to expand trade relations with as many key trade partners as possible,” Mr. Terosa said.

“The opening of new markets is more likely to take place for nontraditional export products. Infrastructure development and greater ease of doing business can induce stronger export activity,” he added.

“The positive external trade position, if sustained, may continue to provide a welcome buffer for the local economy amid softness in other growth driver,” Chinabank Research said.