Trump's new focus on consumption taxes may entangle Singapore in his global trade war

A social media post by US President Donald Trump has opened the door, at least in theory, to a potential tax on the tens of billions' worth of goods the US imports from Singapore.

- Ovais Subhani

On Feb 16, just days after announcing his plans to impose reciprocal tariffs on any country that levies the import of US goods at a higher rate than the US, Mr Trump wrote on Truth Social: "For purposes of this United States policy, we will consider countries that use the VAT (value-added tax) system, which is far more punitive than a tariff, to be similar to that of a tariff."

VAT is broadly a tax on consumption, assessed on the value added to goods and services as they move through the supply chain in about 175 countries.

It is similar to Singapore's goods and services tax, which is applied, with a few exemptions, on local sales and imports from all countries - including the US - at the rate of 9 per cent.

According to the Office of the US Trade Representative, US-Singapore goods trade totalled an estimated US$89.2 billion (S$119.5 billion) in 2024.

US goods exports to Singapore were US$46 billion, up 8.4 per cent from 2023. Meanwhile, goods imports from Singapore totalled US$43.2 billion in 2024, up 5.6 per cent. Hence, the US goods trade surplus with Singapore stood at US$2.8 billion, an 84.8 per cent increase from 2023.

The surplus enjoyed by the US with Singapore is the diametric opposite of the trade deficits with many countries that Mr Trump has defined as unfair to the US. Hence, it is the main reason why Singapore is confident that its exports to the US would avoid any tariffs.