Singapore Exporters Absorbing More Than 20% of US Tariff Costs: Nomura

Others in Asean Absorbed None, With Lack of Margin Flexibility in Labor-Intensive Exports

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Asian exporters are absorbing about one-fifth of US tariffs and passing on the remaining costs, indicated Nomura's Asia Economic Monthly report released on Sept 5.

Advanced manufacturers such as Singapore have absorbed more than 20 per cent of tariff costs; other Asean nations absorbed none. China, Japan and South Korea have absorbed less than 10 per cent of costs.

"This divergence reflects a greater capacity to absorb costs by advanced manufacturers in high-value exports versus lack of margin flexibility in labor-intensive exports for Asean," said Nomura analysts Sonal Varma and Toh Si Ying.

Looking ahead, Nomura said Asia faces a "double whammy" — it will need to keep lower export prices in order to remain competitive in the United States while local currencies appreciate. Asian exporters also face the difficult choice of passing on higher costs, risking a loss of US market share, or absorbing the costs while reducing profitability.

US President Donald Trump's global tariff rates went into effect after midnight on Aug 7, with Singapore hit by the minimum figure of 10 per cent. Malaysia, Thailand and Cambodia were hit by 19 per cent levies, while Taiwan had a 20 per cent rate on its US exports.

Asia's export prices have fallen for automotive, electronics, cutlery, chemicals and aluminum articles, but have increased for textiles, pharmaceuticals, electrical equipment and motor vehicle parts, Nomura found.