SINGAPORE: Singapore’s currency and stock markets declined on Feb 3 after US President Donald Trump announced new tariffs on imports from major trading partners, including China, Canada, and Mexico. According to the latest Straits Times report, the move sent ripples across global markets, stoking fears of a trade war that could affect economic growth, increase inflation and strain international relations.
Global trade and growth at risk — the fallout of new tariffs
Analysts have warned that a broad trade conflict could jeopardize global trade and economic growth, with China and Mexico already retaliating by announcing countermeasures and Trump targeting the European Union as well. Edward Lee, chief economist and head of foreign exchange for ASEAN and South Asia at Standard Chartered Bank, noted that while Singapore is not directly impacted, the tariffs could indirectly harm the country by dampening global growth sentiment.
“Singapore’s economy is heavily dependent on external demand. Any disruption to global growth will inevitably impact Singapore’s performance,” Lee explained. The Singapore dollar fell 0.5 per cent against the US dollar, reaching 1.3654, while the Straits Times Index (STI) dropped 0.76 per cent, closing at 3,826.47 points.
Market shockwaves — a global sell-off
The surprise tariff announcement led to a significant global market sell-off, with stocks, bonds, and industrial commodities such as iron ore and copper all taking a hit. Mansoor Mohi-uddin, chief economist at Bank of Singapore, described the move as a shock to investors, who had not expected such aggressive action so early in Trump’s presidency.
“We anticipated that US tariffs would not become a major concern until later in 2025, after extended negotiations,” said Mohi-uddin. The US equity index S&P 500 fell by 0.5 per cent, while Japan’s Nikkei 225 dropped 2.7 per cent. Despite this, the US dollar strengthened against most currencies as investors sought safety, betting that the tariffs would drive inflation and elevate US interest rates.
Tariff impact on Singapore — economic growth at risk
The tariffs, which were scheduled to take effect on Feb 4, were set at 25 per cent for Canadian and Mexican exports to the US — and at 10 per cent for Chinese goods. However, Mexico and Canada were granted a 30-day reprieve on the US tariffs after both countries pledged to intensify their efforts to prevent illicit drugs and migrants from crossing into the United States.
While Singapore’s direct trade with Canada and Mexico is minimal, the country remains highly interconnected with China, which is its largest trading partner.
Lee noted that the tariffs could reduce China’s growth by 1 percentage point, according to estimates from Standard Chartered’s China team. The US economy, which ranks as Singapore’s second-largest trading partner, is expected to shrink by 0.4 per cent between 2025 and 2034, according to The Tax Foundation.
In response to the uncertain economic climate, Singapore has revised its 2025 growth forecast, now expecting 1 to 3 per cent growth, down from 4 per cent in 2024. Additionally, the central bank has eased its monetary policy to help buffer the economy against potential shocks from the escalating trade conflict.
On Reddit, some netizens shared what they think about the Trump tariffs.
One user said, “Trump is unpredictable, who knows if he will target Singapore for whatever reason he grabs from his or Elon’s ass?”
Another one said, “Singapore’s economy is very leveraged on the downside (if things go wrong globally, it will be pummelled) than it is on the upside (if things putter along steadily, it does OK).”
“There’s a lot of market dynamics that change to adjust to the effects of tariffs. Importers could source for alternative sources let’s say from India and the cargo will be transshipped in Singapore before heading for the US West Coast,” a third user commented.
As the world watches closely, experts warn that without a resolution, financial markets’ strong start to the year could quickly unravel, with long-term repercussions for global trade and growth.