Impact of the Trump tariffs on Singapore and Singapore businesses
Impact of the Trump tariffs on Singapore and Singapore businesses
Direct Tariff Impact
On April 2, 2025, President Trump enacted a 10% tariff on all goods imported from Singapore. This decision took Singapore officials by surprise, given that Singapore maintains a free trade agreement with the United States and, in fact, experiences a trade deficit with the United States, meaning that Singapore purchases more from the United States than the United States purchases from Singapore.
Economic Growth Concerns
Prime Minister Lawrence Wong cautioned that the probability of a "global trade war is growing" and indicated that Singapore may reduce its growth forecast. Initially, Singapore had anticipated a GDP growth rate of 1-3% for 2025; however, the Ministry of Trade and Industry is currently reevaluating and is expected to adjust this projection downward.
Most Affected Sectors
The outward-oriented sectors of Singapore's economy are expected to endure the majority of the adverse effects. These sectors encompass manufacturing, particularly electronics and semiconductors, biomedical science - which exhibits heightened export exposure to the United States - wholesale trade, and transportation. Furthermore, the prevailing global uncertainty is anticipated to affect various service industries, including finance and insurance.
Labour Market Effects
A reduction in growth rates is likely to result in a diminished availability of job opportunities and a limited increase in wages for employees. Should companies encounter challenges or decide to repatriate their operations to the United States, there may be an escalation in retrenchments and job losses.
Government Response
Singapore has opted not to implement retaliatory tariffs, as such measures would merely escalate costs for its citizens. Instead, the government has undertaken several initiatives:
- Establishing a Taskforce, chaired by Deputy Prime Minister Gan Kim Yong, to assist businesses and workers in addressing immediate uncertainties, enhancing resilience, and adapting to the evolving economic environment.
- The implementation of support measures outlined in the 2025 Budget, which includes CDC vouchers, SG60 vouchers, and U-Save rebates aimed at alleviating the cost of living, as well as corporate income tax rebates for businesses, has been prioritised.
- Endeavouring to engage with the United States in order to comprehend President Trump's areas of concern and determine whether they can be resolved through negotiation.
Strategic Adaptation
Singapore is intensifying its efforts to uphold its status as a pivotal node in global trade flows and as a reliable business hub by fostering closer connections with like-minded partners dedicated to the promotion of open and free trade. Additionally, there exists an initiative aimed at enhancing collaboration and integration within the Association of Southeast Asian Nations (ASEAN).
Short-term Business Strategies
Companies in Singapore are accelerating their export operations to take advantage of the 90-day suspension of the significant tariffs proposed by the Trump administration.
Broader Concerns
In addition to the immediate economic ramifications, officials in Singapore have expressed concerns regarding the implications for the global trading framework and the international economy. These tariffs signify a repudiation of the rules-based multilateral trading system, on which Singapore, as a small and trade-dependent nation, relies significantly.
Get In Touch
For more information please contact Michael Velten.
michael@veltenadvisors.com
+6590687547
391B Orchard Rd, Level 22, Ngee Ann City Tower B, Singapore 238874
