[SINGAPORE] A temporary rollback in US-China tariffs has buoyed global markets and near-term sentiment, but economists expect any benefits to Singapore’s economy to be limited and short-lived.
Structural uncertainties still cloud the outlook, and some damage has already been done, they noted.
Said Moody’s Analytics economist Heron Lim: “Singapore might see a small boost, but it will not be substantial.”
After President Donald Trump’s administration announced its first sweeping global tariffs in April, economists noted that the impact on Singapore would be mostly indirect, via effects on China and global demand.
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Any gains from the latest US-China truce would work through similar channels. While the deal marks a de-escalation in tensions, its impact on Singapore will appear mainly through trade and supply chain linkages with China.
No direct tariff rollbacks have been announced for Singapore, which continues to face the blanket 10 per cent rate under Washington’s universal tariff regime.
Temporary boost?
Citi economists Yu Xiangrong and Ji Xinyu said tariff reductions have “come in even bigger than (their) bullish expectations”, which could mean that China’s exports and growth will be hit less hard than previously estimated.
Yet, Moody’s Lim said that reaching a temporary arrangement was “low-hanging fruit”, adding: “Thornier negotiations are ahead, likely putting markets on edge.”
He noted: “A longer-lasting deal between the two biggest economies in the world will be crucial for the business and consumer sentiment.”
For now, Chinese export orders to the US could see a temporary surge during the 90-day tariff truce period, as exporters look to capitalise on lower tariffs, said DBS economist Chua Han Teng.
This would “positively impact Singapore’s exports”, particularly in intermediate goods that are shipped to China for use in its exports to the US.
MUFG senior currency analyst Michael Wan similarly expects more front-loading of China exports to the US – as well as from South-east Asia to the US – which could give Singapore a short-term indirect boost.
The rise in logistics services activity, as well as a front-loading of pharmaceutical and electronics exports, could give Singapore a direct boost “in the very near term”, he added.
However, OCBC chief economist Selena Ling noted that this short-term surge will depend on whether exporters expect further successful talks – in which case they would not rush – or a bumpier road ahead.
Moody’s Lim, however, flagged that business orders in China are unlikely to recover in full in May and June, since US tariffs “remain at a still-hefty 30 per cent”.
“Higher shipping costs and congested ports are also factors that could hurt the return of stronger export numbers,” he said.
Cloud of uncertainties
Economists stressed that the temporary nature of the truce and ongoing tariff uncertainty will limit any positive upside, as investors continue to wait and see.
Moody’s Lim said any growth boost for Singapore “will be marginal for now as businesses remain on hold on longer-term moves, and the fear of escalation is weighing down on both consumer and business sentiment”.
OCBC’s Ling agreed that with continued uncertainties, medium-term capital expenditure or supply chain inclinations “may not fundamentally change”.
With a 10 per cent tariff likely “to be the new normal”, multinational enterprises may resolve to “produce in the US for the US market, produce in China for the China market, and Asean for the rest of the world”, she said
MUFG’s Wan similarly expects companies to put investment plans on hold, as “the end-state and durability of tariffs, not just in China but also globally, is still highly unclear”.
Such uncertainty also remains over US tariffs on other markets, he noted, as companies that make investment decisions are looking not just at the absolute level of tariffs on China, but tariffs on other countries relative to China.
Too late to avoid slowdown
With tariffs remaining higher than at the start of the year, economists noted that a slowdown in global demand has not been averted.
DBS’ Chua still expects Singapore’s growth to slow in 2025, even if the trade truce offers some short-term relief.
The Republic’s export figures will still be dampened by trade frictions, even if not as severely as previously expected, he said.
Besides the direct impact, broader negative effects remain. “The continuing negative impact of trade policy-related economic uncertainty would weigh on business investment and hiring decisions, as well as consumer confidence.”
Despite a short-term boost, the medium-term forecast is still for Singapore’s growth to slow in the second half – not least after front-loading of activity, said Wan.
The country’s slowdown will also come as growth eases for both the US – with high inflation curbing consumer spending – and China, he said.
Moody’s Lim said that with the “damage already done” by one month of tariffs, adding that “there could be a chance” that Singapore may enter a technical recession, defined as two straight quarters of contraction.
OCBC’s Ling said it is “still early days yet” to come to any conclusions about the tariff truce’s impact on China’s growth and, in turn, regional demand conditions for Asean, including Singapore.
“Key things to watch include whether there will be a permanent deal, how (they) handle disputes, and whether other sectoral tariffs are forthcoming,” she added.
