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US, China trade war to impact Singapore’s economy in three ways: Chan Chun Sing in Parliament
THE ongoing trade conflict between the US and China – the two largest economies in the world – will impact Singapore in three main ways, said Minister for Trade and Industry Chan Chun Sing in Parliament on Monday.
Firstly, it is through direct impact from the tariffs that are applicable to the majority of countries, including Singapore.
Secondly, there will be an indirect impact arising from disruptions to global supply chains as a result of the tariffs imposed by the US and China directed at each other.
Thirdly, a trade war could lead to a slowdown in global trade if it escalates and spills over to business sentiment and other factors of growth.
Mr Chan was responding to queries by Nominated Member of Parliament K Thanaletchimi and Member of Parliament Henry Kwek, who had asked about the potential consequences of a global trade war on Singapore.
Mr Chan said that that the US tariffs directly applicable to Singapore affect a relatively small set of products, which include solar cells, modules, washing machines, steel and aluminium.
Singapore’s exports of these products to the US account for about 0.1 per cent of Singapore’s total domestic exports to the world.
But he said: “While this is relatively modest, specific Singapore-based companies in the general manufacturing and electronics sectors that export such products to the US will become less competitive compared to manufacturers in the US when the tariffs are added on.”
While many of the tariffs do not directly affect Singapore, they would have a spillover impact due to Singapore’s role in global supply chains, added Mr Chan.
“For example, Singapore companies that produce immediate goods used as inputs in the production of China’s exports to the US may see softer demand for their goods,” he said.
However, Mr Chan said that the net impact on the Singapore economy and workers are “less easily quantified given the fluidity of the US and China’s tit-for-tat responses”.
“Our modelling indicates that based on the tariffs on product lines that have been announced, the net impact is likely to be modest,” he said, but he added that this is with the assumption that there is no further escalation.
Bilateral trade between the US and China "indirectly contributes to 1.1 per cent of Singapore’s gross domestic product (GDP)", and “any sustained disruption is unwelcome for the region”, he said.
The impact from an escalation of the trade conflict could also result in a “vicious cycle of tit-for-tat measures between major economies”, he pointed out.
“Should these measures reach a tipping point that triggers a sharp and sustained fall in global business and consumer confidence, or a tightening of global liquidity conditions, the macro-environment will fundamentally change,” he said.
“In this scenario, the impact on global consumption and investment on top of the disruption to trade flows will significantly impact Singapore’s open economy.”
Amid these developments, Mr Chan said that Singapore's strong trading networks and diversified sectors will enable companies to navigate the disruptions and seek out new opportunities and alternative suppliers and demand markets.
Despite growing protectionist instincts around the world and US’s unilateral measures to address what it deems as unfair trade practices, Singapore is still committed to uphold a “rules-based multilateral trading system” and work towards greater regional integration, he emphasised.
This is the “best way of maximising opportunities” for companies and supporting job creation, he added.