Singapore braces for Trump's trade war | The Business | ABC NEWS

The transcript discusses the significant impact of US trade policies, particularly tariffs imposed by Donald Trump, on Singapore and Southeast Asia. Businesses are experiencing uncertainty, leading to cautious investment and a slowdown in growth, with some expecting a reduction in year-on-year GDP growth from over 4% to around 2%. While Singapore has so far been less directly affected than some neighbors, concerns linger over sectoral tariffs, especially in pharmaceuticals and semiconductors. The situation also prompts a re-evaluation of regional integration within ASEAN to create a more attractive single market and reduce reliance on the US. Furthermore, potential geopolitical conflicts, such as over Taiwan, introduce additional economic risks due to the region's interconnectedness, particularly in the semiconductor industry. A striking fact is that the US administration has imposed higher tariffs on Singapore's neighbors like Myanmar, Laos, Cambodia, and Vietnam, while Singapore has technically "gotten off lightly" thus f

• Businesses are holding back investments due to uncertainty from US trade policy, impacting confidence and spending.
• Singapore faces a base tariff of 10%, with concerns about additional sectoral tariffs on pharmaceuticals and semiconductors.
• Expected year-on-year growth in Singapore may fall from over 4% to around 2% due to these trade impacts.
• Southeast Asian nations are urged to enhance regional integration to create a more attractive single market and reduce reliance on the US.
• Potential conflict over Taiwan poses significant economic risks due to regional interconnectedness, especially in the semiconductor sec

US Tariffs and Business Uncertainty [00:03]

• Many businesses, like a 3D manufacturing company, are waiting to see the effects of tariffs.
• Uncertainty is causing customers and companies to hold back on commitments.
• Firms are beginning to relocate manufacturing hubs in response to US trade policy.
• Singapore is positioned to offer services for nearshoring and just-in-time manufacturing.

"A lot of customers, companies are holding back uh due to the uncertainty."

Reconfiguring Supply Chains [00:40]

• Business groups note that nations are reconfiguring their supply chains.
• China has redirected investments to Mexico, Vietnam, and Malaysia following previous tariffs.
• These new locations are now under scrutiny by US authorities, leading to caution.

"But those are now under scrutiny by the US authorities. So I think there's a lot of caution around that."

Singapore's Vulnerability and Concerns [01:00]

• Singapore, as an ultimate trading nation, is seen as highly vulnerable to changes in global trade order stemming from tariffs.
• Singapore's role as a logistics hub for the region and globally is threatened by uncertainty.
• Singapore faces a base tariff of 10%, with significant concern over potential sectoral tariffs, specifically in pharmaceuticals and semiconductors.
• Discussions with US counterparts regarding these sectoral tariffs are ongoing, with hopes for a favorable outcome, but an economic impact is still expected.

"Perhaps no country on earth is as vulnerable to the changes in that order flowing from Donald Trump's liberation day tariffs as Singapore, the ultimate trading nation."

Economic Growth Projections [01:45]

• Singapore experienced a growth rate above 4% in the first half of the year.
• Government departments are now expecting year-on-year growth to be closer to 2%.
• The pharmaceutical sector is a major export concern for Singapore to the US.

"But I think the MIT the government departments are expecting yearon-year growth to be more in about the 2%."

Impact on Neighbors and Frontloading [02:14]

• The Trump administration has imposed higher tariffs on Singapore's neighbors, including heavy import duties on Myanmar and Laos.
• Cambodia and Vietnam have been particularly hard hit due to a large volume of their exports going to the US.
• Singapore has technically "gotten off lightly" up to this point.
• The limited impact so far is partly due to companies frontloading their activities.

"In comparison, Singapore has technically got off lightly."

Signs of Slowdown and Uncertainty's Role [02:46]

• Signs of reduced business spending and confidence are emerging.
• Uncertainty, more than the tariffs themselves, is causing businesses to delay new investments.
• This will inevitably impact the external environment and Singapore's economy, given its dependence on external demand.
• The economic impact is expected in the coming months and into the next year.

"And I think more than the tariffs alone it's the uncertainty that's causing businesses to hold back any new investments."

Southeast Asian Response and Regional Integration [03:11]

• US tariffs have prompted soul-searching among Southeast Asian nations regarding a collective response.
• Nations need to make themselves a more attractive single market.
• Despite being virtually tariff-free, ASEAN faces complexity and non-tariff barriers to doing business.
• Efforts are needed to bring down these barriers, fostering closer regional integration, economic ties, infrastructure linking, and payment system connectivity.

"We in Southeast Asia also have to do our part to make ourselves a more attractive single market."

Reducing Reliance on the US [03:56]

• The current situation is a "wakeup call" for regional countries.
• While continuing engagement with the US is important, there's a desire not to "put all our eggs in that basket" and to spread risk by reducing reliance.

"Um for the regional countries to say look as much as we want and should continue engaging with the United States not only do we not want to put all our eggs in that basket um we want to maybe reduce the number of eggs in that basket and spread it around."

Geopolitical Risk and Economic Shocks [04:19]

• Economic uncertainty is compounded by potential conflict over Taiwan and subsequent economic shocks.
• Even a sharp downturn in relations or an economic blockade could significantly impact the region.
• This is due to the high level of interconnectedness with East Asia and Taiwan, particularly in the semiconductor industry.
• Any disruption in Taiwan's semiconductor sector would be very difficult for the region to insulate itself from.

"Even if a very sharp downturn in relations, if economic blockade or whatever it is, um that will already have uh quite significant impact on the region."

The Pressure to Take Sides [04:58]

• A part of the risk involves the US and China demanding that the region choose a side.
• The general sentiment is that countries would prefer not to be in such a position.
• This reality, however, is something they need to come to terms with.

"We would rather not. We don't want to be in that position. But that is a a reality that we need to we need to um come to terms with."

Broadening Risks [05:13]

• As the world becomes more unstable, the risks are not just strategic but also economic.

"highlighting that as the world becomes more unstable, the risks aren't just strategic, but economic"