ST Explains: What Trump's tariffs are, and how they could affect growth in Singapore and more
Trump has branded the day "Liberation Day", though most economists expect US consumers to foot the costs. PHOTO: EPA-EFE
SINGAPORE - US President Donald Trump unveiled sweeping new tariffs on trading partners on April 2, calling them a declaration of economic independence and a move that will make America wealthy again.
Tariffs are taxes imposed on imported goods and used to regulate trade, protect domestic industries and generate revenue.
A fresh "baseline tariff" of 10 per cent will apply to all goods imported into the US from around the world, including Singapore, with steeper "reciprocal" tariffs on at least 60 trading partners that Mr Trump said slapped excessively high duties on American products.
"Reciprocal. That means they do it to us and we do it to them," Mr Trump said at a Rose Garden event at the White House on April 2.
During that speech, Mr Trump defended all of his tariffs as "kind", saying the taxes are lower than the tariffs and other trade barriers other countries impose on imports from the US.
How will Trump's tariffs impact Singapore?
Singapore imposes no tariffs on US products under the US-Singapore Free Trade Agreement (USSFTA). It also imports more from the US than it exports.
In that light, goods exported to the US from Singapore appear to be subject to the minimum 10 per cent tariffs being imposed by Mr Trump, which are set to take effect at the start of April 5.
Certain goods, like pharmaceuticals and semiconductors, which are key exports for Singapore, are on a small list of products that are currently spared from the new tariffs.
Still, imposing a 10 per cent tariff on Singapore's exports to the US is a violation of the USSFTA, which includes the elimination of tariffs between the two countries, making trade in nearly all US and Singaporean goods duty-free.
But further levies might be on the way.
Maybank economist Chua Hak Bin warned that the exemption from tariffs on pharmaceuticals and semiconductors will not last long.
"Clearly, Trump has not made a tariff decision on semiconductors as well as pharmaceuticals, which are both important to Singapore's manufacturing share and export share.
"I don't think they will be zero," he said, adding that he expects an announcement on further tariffs to currently exempted goods by the end of April or early May.
There could also be further tariffs "stacked on top of the 10 per cent baseline rate that has been introduced for Singapore", he said.
While this will not place Singapore at a competitive disadvantage to its neighbours, as the tariffs will likely be imposed across the board, Maybank will nonetheless be downgrading its growth forecasts for Singapore, Dr Chua said.
Semiconductors, which account for about 30 per cent of the Republic's annual exports, and pharmaceuticals, which represent 8.3 per cent, will likely be the industries hardest hit.
Dr Deborah Elms, head of trade policy at the Hinrich Foundation, said exempted goods "are going to be whacked with Section 232 tariffs very soon. These could be higher than reciprocal tariffs".
Section 232 tariffs are US trade tariffs imposed on imports for national security reasons under Section 232 of the Trade Expansion Act of 1962. These tariffs allow the US government to restrict imports if they are deemed to threaten national security.
How will companies, consumers and jobs be affected?
Singapore has for now avoided reciprocal tariffs which have hit its neighbours.
The tariffs on Cambodia were the highest at 49 per cent, followed by Vietnam at 46 per cent, Thailand 36 per cent, Indonesia and Taiwan at 32 per cent each, Malaysia 24 per cent and the Philippines at 17 per cent.
One major way Singapore could suffer would be from much fewer investors setting up their headquarters here as the region's attractiveness wanes under further pressure, resulting in missed opportunities for growth and jobs.
Due to its stable regulatory environment and attractive incentives, Singapore commonly serves as a base for international investors and companies that want to expand in South-east Asia.
As Chinese imports will also be hit with a 34 per cent US tariff, on top of the 20 per cent Mr Trump had previously imposed on China, much of these goods will continue to find their way into other markets, including in South-east Asia.
Local and regional businesses could see their profit margins come under pressure as they struggle to match the low prices of cheap goods from China, economists said.
"If others are now scrambling for new markets, they might find opportunities in your market that never faced much competition in the past. That could easily set off new rounds of protectionism or retaliation," Dr Elms said.
In Singapore, other businesses that could be affected by Mr Trump's tariffs include those making precision engineering equipment and offshore rigs and vessels, said independent economist Song Seng Wun.
As the tariffs are absorbed and costs gradually rise for local businesses, consumers and businesses here could feel the pinch.
According to a flash survey of 36 Singapore companies by the American Chamber of Commerce (AmCham) in Singapore on April 2, nearly half (45 per cent) plan to pass on the increased costs from new US tariffs to their customers.
Nearly seven in 10 (69 per cent) said they expect the new tariffs to have a significant or moderately negative impact on their operations, the study found.
What other areas will be impacted?
Singapore could continue to see its currency strengthen in the months to come.
The Singapore dollar has outperformed most Asian currencies in the first quarter of 2025, supported by a weakening US dollar, which slid further after Mr Trump's latest tariffs on all US imports raised concerns over economic growth and inflation.
While this bodes well for Singaporeans spending overseas, a strong currency could make Singapore exports less attractive at a time when competition is about to get tougher.
Demand for the Singdollar is expected to remain strong given its status as a regional safe haven currency, even as expectations mount for further monetary policy easing as inflation has slowed.
Analysts are already predicting that the Monetary Authority of Singapore (MAS) may ease its currency policy further in April.
In an April 3 statement, MAS said Singapore's foreign exchange and money markets continue to function normally.
"MAS stands ready to curb excessive volatility in the Singapore dollar, and to ensure that Singapore's foreign exchange and money markets continue to function in an orderly manner," it said.
"MAS is closely monitoring developments and assessing the implications for the Singapore economy."
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