Tariff uncertainty remains even as Singapore's economic outlook brightens

Analysts say 90 days may be too short for comprehensive US-China deal to be reached

- Ovais Subhani

The outlook for Singapore's export-driven economy has brightened as the world's two largest economies stepped back from a tariff war that could collapse trade between them and trigger a global recession, analysts said.

The US and China agreed on May 12 to suspend their triple-digit reciprocal tariffs for 90 days for much lower levies while negotiations continue for a broader and sustainable trade deal.

The three-month pause will see tariffs on US exports to China cut to 10 per cent from 125 per cent, while levies on Chinese exports will be reduced to 30 per cent from 145 per cent.

However, some analysts warned that the excitement over the deal could wane in the coming days as realisation sets in that 90 days may prove too short a period to arrive at a comprehensive trade deal between two countries that consider each other strategic competitors and have been locked in a trade war since 2017.

Still, for investors, the cool-down period represents a reprieve from a scenario where US consumers suffer massive price hikes and empty store shelves, while China endures loss of its biggest export market and a drop in manufacturing output.

"The US-China trade deal is a significant de-escalation and allows trade to resume from what was essentially a deep freeze," said Mr Chua Hak Bin, regional co-head of macro research at Maybank.

He said that while a 30 per cent tariff rate on Chinese exports is by no means low - and remains higher than the 10 per cent tariffs faced by most other countries, including Singapore - it will be more manageable than the 145 per cent rate.