Trump's Tariffs and Likely Trade War Will Test Resilience of Singapore's Economy

US leader's protectionist agenda will hit export-driven economies in 2025: Analysts

- Ovais Subhani

The local economy wrapped up 2024 on a positive note but it may be heading for a rough patch, with trade tensions and geopolitical conflicts heightening uncertainty over growth, inflation and interest rates, say analysts.

A trade war is sure to ensue if US President-elect Donald Trump, who takes office on Jan 20, goes ahead with his plan to increase tariffs by as much as 20 per cent on imports from all trading partners, and by 60 per cent on shipments from China.

It is not clear how such extreme measures will be implemented, or what their lasting impact on the global economy will be.

However, analysts agree that Trump's decisive election victory gives him the legitimacy to pursue his protectionist agenda, which will hit economies that depend on trade, such as Singapore.

A recent Monetary Authority of Singapore (MAS) survey showed financial institutions here were most concerned that intensifying trade tensions could impact growth and reignite inflation.

They were also worried about geopolitical risks, such as the renewed conflict in the Middle East and Ukraine, leading to larger and more frequent breakdowns in global supply chains, which will raise business costs.

Experts say slower growth and higher expenses usually result in fewer job opportunities and smaller pay gains, as firms halt expansion plans and cut costs.

A separate MAS report said small and trade-dependent economies could be hit by costlier imports, compounded by slower global growth that could suppress demand for exports. Additionally, interest rates would remain higher for longer, while the US dollar would strengthen.

The gloomy outlook for 2025 comes at the end of a surprisingly good year for Singapore's economy.