Singapore's Economy Is Holding Up, But the Outlook Could Sour Quickly

Front-loading has boosted exports, but the trade picture remains murky.

- Yuan Mei

The Singapore economy's performance over these past six months has remained strong, despite mounting global trade uncertainty since Mr. Donald Trump began his second term as US president.

The country's gross domestic product (GDP) expanded by 4.3 per cent year on year in the second quarter, slightly above the 4.1 per cent in the first. Financial institutions have revised upwards growth forecasts for the year.

Manufacturing is up, bolstered by front-loading effects ahead of the Aug 1 deadline on tariffs. Biomedical manufacturing has rebounded and the electronics cluster—a major driver of Singapore's overall manufacturing sector which includes chipmaking—continues to grow.

For now, we can breathe easier.

Granted, the 10 per cent "reciprocal" tariff is troubling, particularly given the US and Singapore have maintained a free trade agreement for over two decades. But compared with other major players in global trade, the rate imposed on Singapore is modest.

Singapore's exports are also less reliant on the US market compared with other export-driven economies such as Vietnam. The more diversified trade structure means that policy shifts by the US can be buffered by other markets, such as China, Asean and the European Union.

While negotiations between the US and its major trading partners continue, Singapore does not appear to be among Washington's key targets. Washington's focus is its major trading partners with sizeable deficits on trade in goods. Meanwhile, its trade in goods with Singapore had a modest surplus of US$2.8 billion (S$3.6 billion) in 2024 (the surplus becomes US$30 billion if service trade is included).