Singapore businesses pivoting to regional neighbours as tariff uncertainty settles: HSBC survey

[SINGAPORE] As global trade uncertainty settles, Singapore businesses are shifting their supply chains to South-east Asia in a show of renewed resilience, according to the HSBC Global Trade Pulse report released on Monday (Nov 24).

Following a volatile period marked by the “Liberation Day tariffs” earlier in the year, the survey of 6,750 global corporate decision-makers – including 250 from Singapore – suggests that fears of severe revenue disruptions are receding.

Adaptation and stabilisation

While global trade uncertainty persists, “firms in Asia are showing signs of adaptation and stabilisation; their concerns around revenue have eased; and a new trade map is shaping up”, the release read.

More than two in three (68 per cent) of Asian respondents indicated that they felt more certain about the impact of trade policy on their operations compared to six months ago. In Singapore, 57 per cent of firms reported greater certainty regarding trade policy implications.

This clarity has reduced anxiety regarding financial performance.

The percentage of Singapore businesses expecting a significant revenue loss (of greater than 15 per cent) due to supply chain disruptions has plummeted from 72 per cent in April to 40 per cent in October.

Globally, concerns of revenue losses exceeding 25 per cent have similarly dropped from 37 per cent to 22 per cent.

“Tariff uncertainty has galvanised Asia, while a growing sense of certainty is enabling companies across the region to make more informed decisions and plan ahead,” said Aditya Gahlaut, regional head of global trade solutions, Asia at HSBC.

‘Asia for Asia’ shift

As the tariff landscape settles, an “Asia for Asia” trade map is emerging.

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Among Asian firms, 41 per cent plan to increase reliance on South-east Asia; 34 per cent on East and North Asia; and 29 per cent plan on South Asia.

In Singapore, 53 per cent of businesses plan to increase their reliance on South-east Asia, a figure 18 percentage points higher than the global average.

Additionally, 47 per cent of Singapore firms are increasing reliance on East/North Asia (including mainland China, Japan, Hong Kong, South Korea and Taiwan), and 45 per cent are looking toward South Asia.

In terms of the key markets of Singapore businesses, Malaysia tops the list for increasing sales (27 per cent), followed by Australia (26 per cent), India (26 per cent), mainland China (25 per cent) and Japan (23 per cent).

Runa Baksi, head of South-east Asia, global trade solutions at HSBC, noted the growing potential of Southeast Asia as a trading bloc and Singapore’s role as its hub, predicting “more intra-Asia and intra-Asean trade in the years ahead”.

Cost pressures and coping strategies

Despite the optimistic outlook for growth, with 79 per cent of Singapore firms confident in growing international trade over the next two years, cost pressures remain a significant hurdle.

Globally, 66 per cent of businesses expect costs to rise in the next six months, primarily driven by tariffs (54 per cent), shipping and freight costs (47 per cent), and raw material costs (44 per cent).

In Singapore, 78 per cent of businesses anticipate increased costs due to tariffs and trade uncertainties.

To mitigate these risks, companies are adopting diversification strategies. Globally, 84 per cent of firms are either diversifying suppliers or planning to do so.

Of all those surveyed, 88 per cent of businesses remain confident about international trade growth, with one in three businesses having already entered new markets and one in two planning to enter new markets less affected by trade disruption.

More than half of Singaporean companies are also planning to enter into new markets (53 per cent). The majority are actively diversifying revenue streams (51 per cent) and rebalancing their product or service mix (57 per cent).