Singapore Prime Minister Lawrence Wong said on Apr. 8, that the 10% universal tariff imposed by the US appears non-negotiable.

He warned of economic consequences for Singapore, a trade-dependent nation. The country’s growth could be significantly affected, possibly prompting a revision of the 2025 GDP forecast, currently at 1% to 3%.

Wong said it’s uncertain whether Singapore would enter a recession this year.

Singapore avoided higher tariffs faced by other Southeast Asian countries but will not retaliate with its own tariffs.

He warned of a potential global trade war, slower global growth, and reduced demand for Singapore’s exports. The tariffs could also cause companies to shift operations to the US, risking job losses in Singapore. The government will support affected workers and businesses.

The US had a goods trade surplus of US$2.8 billion with Singapore in 2024, according to the US Trade Representative. However, Singapore Trade Minister Gan Kim Yong said the surplus was actually US$30 billion last year.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ The 10% universal tariff breaches a 20-year partnership built on zero tariffs

The US-Singapore Free Trade Agreement (FTA), signed in 2003 and implemented in 2004, was the first FTA between the US and an Asian nation, explicitly eliminating most tariffs immediately with remaining ones phased out over time 1.

This agreement created a zero-tariff framework that has underpinned trade relations for two decades, with the FTA guaranteeing duty-free access for all US goods entering Singapore 2.

Singapore’s strong reaction (“these are not actions one does to a friend”) reflects the foundational nature of this agreement in bilateral relations, where approximately 3,600 US companies operated in Singapore as of 2015, many using it as a regional headquarters 1.

The breach of this long-established agreement explains Singapore’s disappointment despite facing lower tariffs than neighbors like Vietnam (46%) and Cambodia (49%), who are dealing with much steeper trade barriers 3.

The FTA has been central to a trading relationship that both sides claim generates a surplus for the US, though with significant disagreement on the size—$2.8 billion according to US data versus $30 billion according to Singapore 4.

2️⃣ Singapore’s unique position creates a differentiated impact in Southeast Asia

Unlike its neighbors facing punitive tariffs of 40%+ that threaten manufacturing bases, Singapore’s advanced economy faces more complex disruption through potential corporate relocations rather than immediate manufacturing job losses 3.