The Philippines is pursuing changes to its trade agreements with Japan and the European Union (EU) that could affect tariffs and market access for vehicles imported into the country.

Under proposed amendments to the Philippines-Japan Economic Partnership Agreement (PJEPA), the Philippines could consider lowering tariffs on vehicles imported from Japan in exchange for improved market access for Philippine-grown bananas. Separately, the Philippines and the EU have reached substantial agreement on a Free Trade Agreement (FTA), which could alter tariff arrangements for European-made vehicles sold in the Philippine market.

The proposed changes to the PJEPA could affect Japanese-branded models manufactured in Japan and imported directly into the Philippines, rather than vehicles produced within the ASEAN region. Most Japanese-branded vehicles sold in the Philippines are manufactured locally or in other ASEAN markets, such as Indonesia, Thailand, Malaysia and Vietnam, allowing them to qualify for preferential tariff treatment under relevant trade agreements.

Some models are still imported directly from Japan, including vehicles from Subaru and Mazda, as well as performance models such as the Nissan Z, Toyota GR Yaris and GR Corolla. A reduction in tariffs under an amended PJEPA could lower the import costs of qualifying Japanese-built vehicles.

Vehicles that qualify for incentives under the Electric Vehicle Industry Development Act (EVIDA) may also receive tariff and tax benefits under the applicable rules.

The exact tariff concessions for vehicles would depend on the outcome of the PJEPA amendment negotiations. Philippine customs rules provide preferential tariff treatment for qualifying goods originating from FTA partner countries, subject to applicable rules of origin and documentation.

Trade Secretary Ma. Cristina Aldeguer-Roque told reporters that the Philippine Government is pushing to eliminate tariffs on Philippine bananas under the PJEPA, according to a local daily. Japan currently imposes an 8% tariff on Philippine bananas from October to March and an 18% duty from April to September.

Negotiations to amend the PJEPA are ongoing, with the Philippines seeking more preferential tariff treatment for its banana exports. The Department of Trade and Industry (DTI) has identified the agreement as a measure for improving market access for Philippine exporters. In return, the Philippines could consider lowering tariffs on vehicles imported from Japan.

The Philippines is also seeking changes to the conditions governing its banana exports to Japan. Japan remains the largest market for Philippine banana exports, while the Philippines was the world's second-largest banana exporter last year, behind Ecuador.

EU FTA could affect European vehicles

Separately, the DTI has been pursuing other trade initiatives, including negotiations with the EU. The Philippines and the EU reached substantial agreement on an FTA on September 22nd following a video call between European Commission Trade and Economic Security Commissioner MaroS Sefcovic and Philippine Trade Secretary Ma. Cristina Aldeguer-Roque.

A joint statement from Sefcovic and Roque said the agreement puts the deal on a path towards finalisation in the coming months. Negotiators from both sides will continue working on the remaining technical details before the agreement can proceed towards signature and ratification.

The EU-Philippines FTA is intended to change market access and trade and investment arrangements between the two sides, including provisions affecting micro, small and medium-sized enterprises (MSMEs), farmers, manufacturers and consumers. The European Commission said the agreement would liberalise more than 94% of tariff lines, covering more than 97% of bilateral trade.

The Philippines currently benefits from the EU's Generalised Scheme of Preferences Plus (GSP+), which provides preferential access for eligible Philippine exports. The new FTA would establish a framework for bilateral trade once negotiations are formally concluded and the agreement enters into force.

The automotive sector could be among the industries affected by the eventual tariff arrangements. The Philippine market includes European brands such as BMW, Audi, Porsche, Lamborghini, Bentley, Jaguar Land Rover and Mercedes-Benz.

European vehicles currently face import duties. The eventual FTA tariff schedule could alter the cost structure for European-made vehicles, although the specific automotive tariff rates and implementation arrangements have yet to be finalised.

The agreement could also affect European manufacturers that currently have limited or no presence in the Philippine market. Any potential return or expansion by brands such as Volkswagen, Renault, Fiat or Peugeot would depend on their individual business strategies, sourcing arrangements, pricing and the final terms of the FTA.

EU-Philippines trade negotiations

The EU and the Philippines originally launched FTA negotiations in 2015 before talks were put on hold. Negotiations resumed in March 2024, with the two sides conducting several rounds of discussions before reaching substantial agreement in September 2026.

The European Commission said bilateral trade in goods between the EU and the Philippines amounted to EUR 17.6 billion (US$ 20 billion) in 2025, while trade in services reached EUR 10.3 billion in 2024. The EU was the Philippines' fourth-largest trading partner in 2025, accounting for 8.3% of the country's total trade in goods.

The EU-Philippines agreement still requires the remaining negotiations, legal and technical work, and subsequent procedures before it can take effect. The final text will be made public once negotiations have been concluded and ahead of signature and ratification.