Trump’s tariffs: What are Singapore’s possible options in responding?

Singapore faces significantly lower tariffs compared with China (at more than 54 per cent), Vietnam (46 per cent) or even the European Union (20 per cent). This would keep Singaporean exports – like electronics, pharmaceuticals and chemicals – more price-competitive in the US market.

An implication is that Singapore could be perceived by large multinational companies as a relatively low-risk investment destination amid global trade turbulence. In a curious way, it could even cement Singapore’s status as a trade hub.

Prime Minister Lawrence Wong will speak in Parliament on US tariffs and their implications for Singapore at 1pm on April 8.

Veteran American trade experts told The Straits Times that America’s oldest FTA partner in Asia has been treated unfairly. That said, Singapore does figure in the bottom-most 10 per cent tier of Mr Trump’s tariffs.

“There aren’t many others in Asia, outside of Australia, that are in that position,” said Mr William Reinsch, at the Centre for Strategic and International Studies (CSIS).

So what would Singapore, a small and open trade-faring nation, say to the world’s largest economy that has made a sharp break from its historic role as a promoter of free trade to a builder of a wall of tariffs?

“The argument I would use would be that FTA partners ought to be treated the way the FTA requires them to be treated,” Mr Reinsch said, who has also served for 15 years as president of the National Foreign Trade Council, which represents multinational companies on international trade and tax policy issues.

Singapore applies zero tariffs on US products, as long as they qualify as originating goods under the FTA’s rules of origin. The exception is Singapore’s goods and services tax, which applies to both imported and domestic goods, at the rate of 9 per cent.  And certain goods like alcohol and tobacco face excise taxes.

“The concept of a free trade agreement was zero tariffs in both directions. And we, by and large, have that with our FTA partners,” Mr Reinsch noted.

“I would be coming back to the United States and saying: we have these agreements, and the agreements involve zero tariffs. So your 10 per cent is presumably for compensating for non-tariff barriers. But you haven’t actually identified those barriers or labelled them or made any effort to adjust your algorithm or your formula to take into account the actual amount of those barriers. 

“So I would push back and argue that free trade agreement partners ought to be exempt and ought to stay at zero,” he added, cautioning that negotiations will be tough.

Singapore is not the only FTA partner to be hit. The US has comprehensive FTAs with 20 countries including Australia, South Korea and Israel.

During a visit to Washington on April 7, Israeli Prime Minister Benjamin Netanyahu said Israel will drop trade barriers to erase its trade deficit with the US. But it was not enough to immediately earn a reprieve from the 17 per cent tariff that Mr Trump has levied on the US’ oldest FTA partner. South Korea, which faces 26 per cent tariffs, is sending its Trade Minister Cheong In-kyo to Washington for talks starting April 8.

If it indeed does so, Singapore would be joining at least 70 other nations – including China, Japan and Vietnam – that the White House says are wanting to talk tariffs.

“Most of the negotiations are going to be between the United States and countries that are well above 10 per cent and they’ll be focused on getting them down as close to 10 as they can,” noted Mr Reinsch. “Getting them below 10 is, I think, unrealistic,” he said.

The conundrum for Singapore is that there are no particular trade barriers or problems, so in that sense there is nothing to “solve”, said Mr Frank Lavin, a former US ambassador to Singapore who had helped negotiate the 2004 FTA that resulted in bilateral trade and investment growing significantly in both directions. 

But the Trump administration could be amenable to talks, given its penchant for cutting deals.

“I would note that the current administration also places a priority on the public dimension and symbolism of these issues, so my one piece of advice would be to send a Cabinet-level official to meet with the US Commerce Secretary for an overall review of the bilateral trade relationship.

“An in-person meeting usually results in a lowering of temperature and a better understanding of issues,” added Mr Lavin, who served as undersecretary for international trade at the Department of Commerce in the George H. W. Bush administration where he was the lead trade negotiator for both China and India. He is now a visiting fellow at the Hoover Institution.

US goods trade with Singapore totalled an estimated US$89.2 billion in 2024, according to the Office of the US Trade Representative. US goods exports to Singapore in the same year were US$46 billion, up 8.4 per cent (US$3.6 billion) from 2023. 

US goods imports from Singapore totalled US$43.2 billion in 2024, up 5.6 per cent (US$2.3 billion) from 2023. The US goods trade surplus with Singapore was US$2.8 billion in 2024, an 84.8 per cent increase (US$1.3 billion) over 2023.

Mr Reinsch said Singapore can also turn the disadvantage of the 10 per cent tariff into its favour.

“As we get into tariff arbitrage situations, Singapore is likely to be a beneficiary,” he said.

“So they should be aware of that and moving to take advantage of it.”

The Trump administration has dropped hints that more tariffs may be forthcoming on specific sectors like semiconductors and pharmaceuticals, which are key exports from Singapore. These will roil global trade further.

Still, multinational companies encountering higher tariffs on countries like China and Vietnam may choose to shift manufacturing to lower-tariffed nations. 

Viewed in this way, Singapore, with the 10 per cent tariff rate, robust infrastructure and stable business environment, becomes an attractive relocation destination.

Companies already operating in Singapore, for example in the tech and pharma sectors, could expand their operations. Newer investments can also flow in, which would cement Singapore’s existing role as a regional manufacturing and logistics hub.

Within Asean, Singapore could emerge as a regional gateway for the grouping’s exports to the US, thus boosting the volume of trade.

Bhagyashree Garekar is The Straits Times’ US bureau chief. Her previous key roles were as the newspaper’s foreign editor (2020-2023) and as its US correspondent during the Bush and Obama administrations.