SINGAPORE: The ongoing trade conflict between the United States and China will have global repercussions, but the “greatest concern” for Singapore is if it escalates into a “vicious cycle of tit-for-tat measures between major economies”, said Minister for Trade and Industry Chan Chun Sing on Monday (Jul 9).
Mr Chan, responding to parliamentary questions from MP Henry Kwek and NMP K Thanaletchimi, said that if these measures reach a tipping point that triggers a sharp and sustained fall in global business and consumer confidence, or a tightening of global liquidity conditions, the macroeconomic environment will “fundamentally change”.
“In this scenario, the impact on global consumption and investment on top of the disruption to trade flows will significantly impact Singapore’s open economy,” the minister said.
He also highlighted two other levels of impact that will affect the local economy. The first is on the impact from higher generalised tariffs that are applicable to the majority of countries, including Singapore.
Mr Chan said this affects a “relatively small set of products” here, as these are essentially US tariffs applied globally on solar cells and modules, washing machines, steel and aluminium. Singapore’s exports to the US account for about 0.1 per cent of the country’s total domestic exports to the world.
He said while relatively modest, specific Singapore-based companies in the general manufacturing and electronics sectors that export such products to the US will become less competitive compared to manufacturers in the US. Local agencies are in touch with them to facilitate applications for product exclusion and to explore alternative markets, he added.
On the second level of impact, Mr Chan pointed there will be indirect impact from tariffs imposed by US and China, as well as those by the European Union, Mexico and Canada in retaliation.
While these tariffs do not directly affect Singapore exports, these would have spillover impact due to the country’s role in global supply chains, he added. For instance, companies that produce intermediate goods used in the production of China’s exports to the US may see softer demand, he explained.
“The net impact on the Singapore economy and our workers is less easily quantified given the fluidity of the US and China’s tit-for-tat responses,” Mr Chan said, adding there will be potential for firms to mitigate some of the impact by redirecting exports of intermediate goods to other markets.
He added that MTI’s modelling indicates that based on the tariffs on product lines that have been announced, the net impact is “likely to be modest” assuming no further escalation in trade tensions between both countries.
“On the whole, bilateral trade between the US and China indirectly contributes to 1.1 per cent of Singapore’s GDP, and any sustained disruption is unwelcome for the region. In the meantime, our economic agencies are working closely with companies to identify any disruptions promptly and restructure their supply chains where necessary,” the minister said.
Mr Chan also reiterated the country’s stance, stating its external linkages that have made it more resilient in facing uncertainties in the global economy are “best safeguarded by a strong set of World Trade Organization (WTO) rules and enforcement, and by our network of Free Trade Agreements”.
“We are in good standing with all our trading partners, including the US and China, and have urged that ongoing trade disputes be resolved through negotiation,” he said.
“We have also forged ahead with like-minded partners to continue paving the way for regional integration to bring about more opportunities and growth.”
This includes the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in March this year, and the ongoing efforts to reach the conclusion of the Regional Comprehensive Economic Partnership (RCEP), he pointed out.