Why S'pore and its Businesses Stand to Lose With US Tariffs on the Region

They face risks from impact on bottom lines, added US scrutiny of transshipments, uncertainty

- Annabelle Liang

The count is on to Aug 1, when retaliatory tariffs by the US are due to take effect—and Singapore businesses are busy hitting the keys on their calculators.

This is because many of them are contending with an equation that could extend far wider than the US tariff rate on Singapore.

That tariff, which took effect around three months ago, stands at 10 per cent. Key exports from Singapore to the US, including pharmaceuticals and semiconductors, are currently exempt from this tax.

Singapore has yet to receive a tariff letter from US President Donald Trump detailing whether it will be subject to new retaliatory tariffs.

But even if no additional tariffs are imposed, the city-state will be negatively affected by a sweep of higher taxes across Asia, said Mr Alex Holmes, regional director at the Economist Intelligence Unit.

"On the face of it, Singapore becomes more competitive as an export source for the US, with only the 10 per cent baseline tariff. That gives it a 10 percentage-point boost relative to Vietnam, 15 percentage points relative to Malaysia, et cetera. Therefore, it might be expected to win a larger slice of US demand," he told The Straits Times.

"However, Singapore will be less concerned about its slice of the pie than the size of the pie itself."

Mr Holmes believes the tariffs will ultimately cause a weakening in US demand for imports, as some foreign firms raise the prices of their products.

This has not shown up fully in the latest US trade data because of front-loading, he said, referring to US importers taking in orders early in anticipation of higher prices.

"General global trade is going to soften. Not yet, but expect a big drop-off once front-loading inevitably fades. This will hit Singapore's re-export and trade logistics sector," he added.

When broken down, the US tariffs result in three big risks for Singapore.