Impact of US and China Protectionist Measures on Singapore’s Economy

Mr Patrick Tay Teck Guan asked the Minister for Trade and Industry what is the impact of the current protectionist measures by the United States and China on Singapore's economy in relation to trade, investments, jobs and Singaporean workers who are working in companies which are or may be impacted by those measures.

Mr Speaker, Sir, China and the United States (US) are major economic partners to countries around the world, including Singapore. To date, the direct negative impact of the tariffs announced by the US and China on the Singapore economy is limited, given the modest share that the affected products have as a percentage of Singapore's total domestic exports. The Ministry of Trade and Industry's (MTI's) analysis estimates the tariffs to directly impact about 0.09% of our domestic exports to the world.

Nonetheless, we are closely monitoring developments, particularly for any longer-term indirect impact on companies and workers. Our economic agencies are in close contact with companies that may be affected. Singapore has also registered our concerns with the relevant US and Chinese departments and is continuing to engage them.

Singapore is a strong proponent of free trade and supporter of the rules-based multilateral trading system. We remain concerned that an escalating cycle of expanding unilateral tariff measures will result in negative spillover effects on global supply chains. Any disruption to global trade flows or trade volumes will affect big and small economies alike. We hope that countries will exercise restraint and avoid further escalation of tensions.

I wish to thank the Minister for his reply. Recently, I spoke to a professionals, managers and executives (PMEs) who work in a US multinational corporation (MNC) situated in China, and she has expressed concerns over the uncertainties of what is happening. So, they are watching that space closely. It is not just the US tariffs. There are a few things that are happening. They are looking at a potential review of the US interest rates, they are also looking at Base Erosion and Profit Shifting (BEPS) coming up and, of course, at the same time, in the US, corporate taxes have gone down as well. So, there are quite a few measures which have caused a bit of uncertainty among workers, particularly so because there are quite a number of our PMEs and workers as well working in US MNCs or even Chinese MNCs in Singapore as well as their respective countries. So, I would urge the Government, especially the economic agencies, to pay a close watch and to stand prepared, particularly with measures, to help these workers.

Mr Speaker, Sir, let me first thank Mr Patrick Tay for his observations. His observations are right. If I may just elaborate on some of those observations.

Indeed, any unilateral actions will have direct and indirect impact. All these, cumulatively, will cause a lot of uncertainties to the market. There are uncertainties that are of immediate consequence because the trade flows and trade patterns are disrupted. There are also indirect impacts that affect the longer-term investments and these create another round of uncertainties. How should Singapore manage such situations?

First and foremost, as an economy, we are an open economy. We must make sure that we are not overly dependent on any particular markets, which is why a couple of days ago, I mentioned during the Debate on the President's Address that we must continually expand and diversify our markets to make sure that we are not overly dependent on any particular market for our products and investments. So, that is the first order of business.

I have also asked MTI staff and economists to do an in-depth study of the possible implications of a long drawn out trade war or an escalating trade war. This will require further study because there are at least a few levels of implications for us. The first level of implication is that if the tariff goes up on specific products, there is a direct impact on the cost of business, the cost of the factories, companies and so forth. That is the easy part. But there is also an indirect impact, which is, even though the tariffs are not targeted at Singapore, it will cause the global trade flows to shift. And when the global trade flows shift, it will have a knock-on impact on Singapore. Whether it is positive, negative, to what extent, we will need to study this carefully.

There is yet a third impact because when the tariffs are targeted even at third-party countries, it affects the trade flows between and amongst these countries, which will then have yet another round of consequent effects on Singapore.

So, all these are complex issues. It requires us to watch the trends carefully, as Mr Patrick Tay has mentioned. It requires us to review our economic models to make sure that we understand the shifts in the trade flows and ask ourselves what other actions do we need to undertake in order to safeguard ourselves from all these uncertainties.

So, these are the things that MTI will continue to watch carefully, not just in isolation, but also with the other Government agencies and also with our other partners, trade partners included.