Singapore avoids worst Trump tariffs but faces trade slowdown

While Singapore avoided much harsher levies, such as a total of 54 % on China, 24 % on Japan and 25 % on South Korea, analysts believe that advantage will pale in comparison to the hit to Singapore’s exports and growth outlook from a global slowdown in trade and demand for goods.

Also, there is still the lingering threat of a blanket 25 % tariff on all US imports of semiconductors and pharmaceuticals, which analysts said is still under consideration and may come later.

Chua Hak Bin, co-head of macro research at Maybank, said that Singapore’s free trade agreement and bilateral trade deficit did not completely shield it from the universal 10 % tariff, but protected the Republic from punishing reciprocal tariffs that many other Asian countries will face.

“Singapore will, however, be impacted by the massive deflationary shock to demand and trade. Manufacturing and exports will likely turn lower and contract in the coming quarters,” he said, adding that Maybank is reviewing its forecasts for Singapore and may downgrade its 2.6 % gross domestic product growth prediction for 2025.

A deflationary shock refers to a situation where there is a sudden and significant decrease in the general price level of goods and services, leading to lower production, lower wages and lower demand from businesses and consumers.

The Ministry of Trade and Industry’s full-year 2025 forecast for Singapore’s economic growth stands at 1 % to 3 %. That is already slower than the 4.4 % growth achieved in 2024.

Ang Wee Seng, executive director of the Singapore Semiconductor Industry Association, said the US reciprocal tariffs will throw into disarray the cost management and investment plans of chipmakers worldwide.

“The newly announced US tariff adds further complexity to an already intricate and globally interdependent semiconductor supply chain,” he said, adding that much will depend on how businesses respond and, importantly, whether other countries retaliate with their tariff measures.

“While the immediate impact is still unfolding, it’s clear that this move will introduce new cost and planning considerations for companies involved in chip and electronics manufacturing and trade,” he told The Straits Times. 

Concerns over the outlook were reflected in the stock market, with the benchmark Straits Times Index closing 0.3 % down at 3,942.23 points on April 3.

However, the drop here was much less than the 2.77 % in Japan’s Nikkei index, 1.52 % in Hong Kong’s Hang Seng, and Bursa Malaysia’s 0.5 %.

Some analysts were rather sanguine about the prospects for Singapore stocks.

James Ooi, market strategist at Tiger Brokers, said: “Singapore equities may outperform their regional peers in the near term due to relatively smaller US tariffs, widening equity market breadth, resilient corporate earnings and improving investor sentiment.”

Asian currencies were mixed as the US dollar fell against major peers such as the euro and the Japanese yen. The Singapore dollar was also up 1.02 % versus the greenback at 6pm Singapore time.

Philip Wee, senior currency strategist at DBS Bank, said currencies were pulled in both directions by Trump’s tariff announcement.

He said that while some currency traders are cautiously optimistic, others see the sweeping tariffs as confirming a hard pivot from decades of globalisation towards protectionism and view the tariff rates as sufficient to weigh on global trade volumes and world growth.

“Hence, expect two-way swings as the global response is still forming, with some countries seen retaliating and others negotiating, amid narratives looking for a deal with the US and resignation to the ‘new normal’ on global trade,” he said.

Most analysts said it is too early to tell at this juncture how Singapore will respond.

Selena Ling, OCBC’s chief economist and head of treasury research and strategy, said Singapore’s resilience will depend on how well it adapts to shifting trade flows.

The Republic can potentially benefit from companies diversifying away from the more heavily tariffed countries. But Singapore may still have to manage broader economic uncertainties and financial market volatility.

“For now, we have to wait and see what happens during the period of negotiations and retaliation,” she said.

The Monetary Authority of Singapore (MAS) assured markets that it is ready to act if needed.

“MAS stands ready to curb excessive volatility in the Singapore dollar, and to ensure that Singapore’s foreign exchange and money markets continue to function in an orderly manner,” said the central bank in a statement on April 3.

It added that while Singapore’s foreign exchange and money markets continue to function normally, it is closely monitoring developments and assessing the implications for the Singapore economy.

The International Chamber of Commerce (ICC) issued a statement describing the new tariff measures as a shock to the global trading system.

Speaking on behalf of more than 45 million companies in over 170 countries, ICC secretary-general John W.H. Denton AO said: “What we have seen today (April 2) represents a watershed moment in American trade policy that poses severe downside risks to the global economy.”

He said businesses across the ICC network will be seeking urgent clarification from the relevant US authorities on how the new country-level tariffs will be applied in practice, including how they interact with sector-specific duties and rules of origin requirements.

“Given the almost immediate entry into force of the new measures, there is a clear risk of costly supply chain disruptions and Customs backlogs absent express guidance being provided promptly,” he said.

Hsien-Hsien Lei, chief executive officer of the American Chamber of Commerce in Singapore, said a recent flash survey it conducted on the impact of tariffs on business found that tariffs and trade tensions caused companies to feel greater uncertainty. There are close to 6,000 US companies doing business in the Republic.

“Businesses are delaying major decisions that would affect operations,” Lei said, adding that nearly half of the survey respondents plan to pass on increased costs to consumers.

The baseline tariff of 10 % on all imports into the US will come into effect on April 5. The much higher reciprocal tariffs on trade partners such as China, the European Union and Japan will take effect on April 9.

Ovais Subhani

The Straits Times

Asia News Network