Just weeks into his second term in the White House, United States President Donald Trump has introduced a slew of trade policies aimed at exerting political pressure on other countries.
What do these moves towards protectionism mean for consumers and businesses, including those in Singapore?
Mr Trump's latest move could risk further retaliation by major trading countries, potentially disrupting global supply chains, driving up costs for businesses everywhere and creating heightened uncertainty for the global economy, she added. “When we first started in 2002, there were no tariffs and we were paying around 2.9 per cent import tax. But when Trump first came into office ,
His company adapted by absorbing some of the price increases, he said, adding that his clients have since become used to the higher prices under the new “status quo”. At Nam Shiang & Co, a Singaporean household products importer, sales and marketing manager Choo Tze Ann said a few of the factories the company worked with in China had to close during Mr Trump’s first term because of their heavy reliance on exports to the US.
And what will the consequences be, especially for businesses in Singapore, should a broader trade war erupt and tensions between the world’s two largest economies, US and China, escalate?To be fair, the backlash against globalisation did not start with Mr Trump’s political ascendancy and his trade policies. Momentum against the process that promotes interdependence and integration of world economies had already been building over the past decade.
Associate Professor of Economics Chang Pao-Li from the Singapore Management University said the world economy tends to repeat its cycle every century. In return, China raised tariffs on US products, with four rounds in 2018 and two in 2019, affecting an estimated $109.3 billion of Chinese imports across over 5,000 distinct products, by 2017 trade values.strong global economic recovery in 2021 to 2022, before a slowdown again in 2023, Assoc Prof Chang added.
“This story of the ship just showed the vulnerability of global trade to events. Supply chains are vulnerable to sanctions, export controls and other laws, so organisations are moving towards strengthening and bringing in their value chains,” he added. In the US case, a favoured tool in President Trump’s arsenal is the imposition of tariffs, which have long been used to protect domestic industries.
Prof Loh, who is director of the Centre for Governance and Sustainability, noted: “Trump is using these tariffs as a punishment tool. There’s no relation between tariffs and illegal immigration, but he’s using it so will be more vigilant in their border control and in the export of drugs.” This encompassed efforts to curb perceived Chinese dumping, combat the theft of strategic intellectual property and redesigning or withdrawing from regional agreements viewed as detrimental to US interests.
Both Mr Trump and Mr Biden opposed the appointment of new judges to the body over its alleged judicial overreach in trade disputes. In a notable move, China joined the 15-nation Regional Comprehensive Economic Partnership , a free trade agreement including Indonesia, Singapore, and New Zealand that came into effect for 10 participating countries in 2022.
Ms Tam Nguyen, the chief executive officer of GOL Solutions, observed that some of her clients, in an effort to avoid US tariffs on China during Mr Trump's first term, adopted a strategy known as 'Her firm, a Singapore-based supply chains solutions provider, supports e-commerce businesses, manufacturers, and logistics companies in complying with trade regulations and maintaining uninterrupted supply chains.
He noted that businesses are closely monitoring both Chinese and US policies, though some may feel increasing pressure to choose between expanding in the US and China. While there may be a “displacement effect” where other Asian nations stand to gain from China’s losses, Prof Loh said Singapore is likely to be worse off in a trade war, due to reduced US investment activity and impact on economic growth.
Despite predictions that Singapore could face slower growth and weaker business sentiment in the face of new US tariffs, some other businesses are looking out for potential opportunities on the horizon. For example, global companies might relocate their operations to open economies like Singapore, allowing Mr Tan’s company to help these firms establish and grow their operations.The agreement on the SEZ, inked in January, stated that the deal will promote and facilitate investments across 11 sectors including manufacturing, logistics, food security and energy.
“Today, the US is our top trading partner in services, our second largest in goods and our largest foreign investor. In fact, if you add up the stock of US foreign direct investment into Singapore, the US has invested more in Singapore than it has invested cumulatively in China, India, Japan, and the Republic of Korea combined,” said Dr Balakrishnan.
Experts concurred that it will be crucial for Singapore to double down on trade diversification if it becomes clear that the US cannot be persuaded from the path of protectionism. Mr Kenneth Lee, CEO of semiconductor equipment solutions provider Global TechSolutions, said that he anticipates potential challenges in cost structures and market access, given the US focus on reshoring semiconductor manufacturing.In Mr Trump’s first term, the increased US tariffs and restrictions on semiconductor-related exports and imports led to rising costs in sourcing critical components, he said.
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