THE escalating trade tensions between China and the US have sparked concerns among the business community here over the potential impact on global growth.
The "tit-for-tat" protectionism measures announced by the two global superpowers are fuelling fears of a protracted trade war, which would be bad news for Singapore's small, open economy.
A spokesman from Singapore's Ministry of Trade and Industry (MTI) said the government is monitoring developments and noted that China and the US are major economic partners for many countries, including Singapore.
"An escalating cycle of expanding tariff measures will have a negative impact on international supply chains and trade and global growth," the spokesman added.
Singapore Business Federation (SBF) chief executive Ho Meng Kit is urging companies facing difficulties with the US-China trade disputes to contact the federation.
"At times like these when trade policies are uncertain, it is very important for our companies to know how to use our free trade agreement network to provide them with better stability and predictability," he added.
But there is a silver lining: some trade diversion could occur, with importers from the US and China looking to suppliers elsewhere.
If the tariff measures are implemented to the letter, regional exporters, particularly in Malaysia, Singapore and Thailand, would be well placed to benefit from the displacement of demand for certain product categories such as machinery, chemicals, aircraft parts, rubber tyres and medical equipment, said CIMB economists Michelle Chia and Lim Yee Ping in a research note.
"However, some sectors will also face disruptions in the supply chain for intermediate or capital goods that are exported directly or via other countries to China, and eventually destined for the US," they noted.
Singapore-listed commodity firms saw a knee-jerk reaction in their stock prices following the tariff announcements.
Global commodities trader Olam had fallen 4 per cent to reach S$2.22 on Wednesday from Monday's S$2.32. Agribusiness group Wilmar International's share price also declined 4 per cent over the same period to reach S$3.08 on Wednesday.
Both stocks have since recovered slightly.
RHB analyst Juliana Cai noted that China is the world's largest soybean importer, mainly because it is also the world's largest producer and consumer of pork. Crushed soybean produces soybean meal as its main ingredient - the key protein source used in China's livestock feed.
"If the tariff takes effect, we think the long-term impact on Wilmar would be negative-to-neutral," she noted. Wilmar is the second-largest soybean crusher in China.
"Currently, there is strong demand for soybean meal from the livestock industry, but there is no certainty on whether Wilmar would be able to pass on any additional cost to customers."
When contacted, Wilmar said the company is still assessing the impact of the tariffs.
The Trump administration took a hit at China on Tuesday with a proposed list of more than 1,300 exports from the country that would face a 25 per cent tariff. About US$50 billion worth of imports from China could be affected, including flat-screen televisions, medical devices and aircraft parts.
China then struck back with its own list of 106 American goods - also worth US$50 billion - which could be subject to tariffs, including soybeans, cars and chemical products.
The US is allowing 60 days for public feedback and has not specified when the tariffs would take effect, leaving a window open for talks.
"China has toughened its rhetoric and made reciprocity its response. But it remains open to talks with the US - the key question is whether the US will bite," said OCBC economist Selena Ling.
"The risk of an outright trade war has escalated, so the next few months will be tricky, if not choppy," she noted.