(In this post, we will be discussing the impact of the US and China Trade War on Singapore.)

For many years, US has been running a trade deficit with China. To revive the US economy, Trump has decided to impose tariffs on US$50 billion of Chinese imports, set to kick in on 6th July 2018. In response, China announced that it would impose its own tariffs on $34 billion of US products. How will this trade war affect Singapore and the 2 big economies?

Living in a globalised environment where economies are interlinked in a web-like pattern, trade wars can have ripple effects on other countries. As a result of the tariff imposition on China products, China products will become more expensive to purchase. Thus, locals may choose to switch to cheaper options like locally produced goods. This helps boost the local economy, reviving the trade deficit and at the same time, boost employment. However, as a result, China’s exports will decrease. This will slow down its GDP growth, hence it is likely to rectify the situation by increasing its net exports. As a result of this trade war, Singapore maybe affected due to its trade agreements with both countries. Even if the impact is not immediate, the future impact is still indetermine if the trade war continues.

However, for a more immediate impact to Singapore, Singapore is seem to be gaining from the trade war. If the consumption of China-made solar panels in the US falls, the Chinese manufacturers would have a surplus of supply, hence driving prices down for other export markets. This could in turn allow Singapore firms to extend better discounts to its customers. Furthermore, if the tariffs increases the prices of China goods, making it less competitive, they could also Southeast Asian Companies to make inroads into the American Economy. In addition, Chinese firms who are operating in the US may be incentivise to move to the Southeast Asian countries such as Vietnam and Thailand, where production costs are low. As such, Singapore may actually benefit from the trade war.

Still, with the trade war being indeterminant and hence many uncertainty arises, many investors are pulling out of the markets. This will slow down GDP of numerous countries. This is especially so in Singapore, which relies heavily on investments.

In conclusion, the effect of the US-China trade war on Singapore cannot be determine as of now. However, if it were to continue, both US and China are likely to suffer heavily.

Categories: Business Articles