Ministerial Statement by PM Lawrence Wong on the US Tariffs and Implications

Mr Speaker  

We have known for some time that the world is in flux. The familiar signposts are fading. But the contours of a new global system have yet to take shape.  

So we are in a period of transition – uncertain, unsettled and increasingly unstable.

The recent “Liberation Day” tariff announcements by the US confirms this stark reality: the era of rules-based globalisation and free trade is over.

This marks a profound turning point. We are entering a new phase in global affairs – one that is more arbitrary, protectionist and dangerous.

For nearly 80 years since the end of World War Two, America was the anchor for the free market economies of the world. It championed free trade and open markets, and led efforts to build a multi-lateral trading system.

This WTO system ushered in decades of global growth and stability. It allowed trade to flourish and lifted millions out of poverty. It benefited the world – and contributed to America’s own economic strength.

And objectively, America continues to enjoy unrivalled economic heft. In fact, the US rebounded more quickly than other advanced economies from the Covid pandemic; it has surged ahead of all its major competitors in the advanced industrial world.

But not all Americans feel this way about their economy. There are hollowed-out towns in what was once America’s thriving industrial belt. There are workers whose jobs have disappeared, and whose incomes have stagnated. They believe that the American economy is fundamentally broken.

Discontent was already visible in the 1990s, when protestors disrupted the WTO meeting in Seattle.

Frustrations deepened following the Global Financial Crisis of 2008, and more recently, after the Covid pandemic.

To be clear: the global economic system is in need of reform.

Singapore and many others have called for changes.

And we have been working with like-minded countries and partners at the WTO to reform its processes.

A key concern in America is China – the sense that the US had given away too much in allowing China to join the WTO; and that China competes on an unfair basis, for example, by heavily subsidising its own companies, putting up non-tariff barriers, and restricting market access to US firms.

These concerns should be addressed within the WTO framework.

In particular, the trade arrangements and concessions made in the past when China was only 5% of the world’s economy should be updated when China now makes up 15% of the world’s GDP.

And if there are disagreements, they should be resolved through the WTO’s dispute settlement system, which has been paralysed, and urgently needs to be restored and reformed.

But what the US is doing now is not reform. It is rejecting the very system it created.

The US has imposed a blanket 10% tariff on imports for nearly all countries. On top of that, it has layered on higher tariffs – up to 50% – for selected countries, especially those that run a trade surplus with the US.

According to the administration, the sweeping tariffs are needed to fix America’s trade imbalances. But there is nothing inherently wrong about running a trade deficit. It simply means that American consumers are buying more from the world, than the world is buying from America.

Moreover, the focus has been solely on the goods trade. That only gives a partial picture. In fact, the US runs a surplus with many of its trading partners in services – exporting software services, education, entertainment, financial and business services. But this fact has been completely ignored.

In Singapore’s case, we have an FTA with America. We impose zero tariffs on US imports, and we actually run a trade deficit with the US – meaning we buy more from them than they do from us.

If the tariffs were truly reciprocal, and if they were meant to target only those with trade surpluses, then the tariff for Singapore should be zero.

But still we are being subjected to the 10% tariff. We are very disappointed by the US move, especially considering the deep and longstanding friendship between our two countries. These are not actions one does to a friend.

Asia bears the brunt of the US tariff increases.

Within the region, China is the hardest hit – facing a 34% tariff this round. And this is on top of the 20% tariff increase imposed over the last 2 months, and the 20% from the first Trump administration. So taken together, the average US tariff on Chinese products now exceeds 60%.

In Southeast Asia, the tariff rates range from 10% to 49%.

These measures will accelerate the fracturing of the global economy.

Instead of flowing based on economic efficiency, capital and trade will increasingly be diverted based on political alignment and strategic considerations.

Several members have asked about the impact of the tariffs on specific industries in Singapore. We are assessing the situation carefully. But our deeper worry is not the direct impact that these businesses face. It is the wider implications for the global trading system and the world economy. So let me explain.

First, the “reciprocal” tariffs are a fundamental rejection of the WTO rules.

One of the cornerstones of the WTO multilateral trading system is the Most Favoured Nation (MFN) principle. Most Favoured Nation sounds like giving special privileges. Actually, it means the opposite: that every member must treat all other members equally. In other words, if a country extends more favourable terms or imposes additional restrictions to one trading partner, it must do the same to all other WTO members.

There are some carve outs and exceptions to the MFN rule, for example to allow free trade agreements. But MFN has long been the bedrock of the multilateral trading system. It ensures a level playing field, prevents discrimination, and enables countries – big or small – to compete fairly in global markets. This has helped to liberalise trade amongst more than a hundred WTO members, each with different economic, and political and social concerns.

America’s new tariff regime is a complete repudiation of the MFN principle. It opens the door to selective country-by-country trade relationships, based on unilateral preferences.

If other countries adopt the same approach as the US, the rules-based trading system will unravel. This will spell trouble for all nations. But smaller countries like Singapore will face greater pressures. Because small countries have limited bargaining power in one-on-one bilateral negotiations. So the major powers will dictate the terms, and we risk being marginalised and sidelined.

Second, the likelihood of a full-blown global trade war is growing.

Singapore has decided not to impose retaliatory tariffs. Doing so will only lead to increased costs for Singaporeans. But other countries may not be guided by the same considerations and may have different perceptions and views.

China has already imposed retaliatory tariffs on US goods.

Others, like the European Union, are considering their next steps.

Some think that the new tariffs are a negotiating tactic – a negotiating tool by the US to extract concessions in other areas. This was what President Richard Nixon did in 1971 – he slapped a 10% surcharge on imports to pressure Germany and Japan to devalue their currencies, and when they did, the tariffs came off.

Indeed, there is a brief window for countries to negotiate and get some reprieve from the US before the higher tariff rates take effect, and it may be possible for some rates to be lowered.

But we have to be realistic. Once trade barriers go up, they tend to stay up. Rolling them back is much harder, even after the original rationale no longer applies.

Even if some partial accommodations are eventually worked out, the uncertainty generated by such a drastic move will dampen global confidence and growth. It will be very hard to restore the previous status quo.

And in particular, it does not look like the 10% universal rate is open for negotiation. This seems to be the fixed minimum tariff, regardless of a country’s trade balance or existing trade arrangements.  

Furthermore, there are other forces that could maintain the momentum for tariffs.

In particular, many European countries are eager to protect their critical industries like electric vehicles, green technologies and semiconductors from Chinese competition. They do not want to be a dumping ground for exports from China or other countries.

There is also a growing push across the West to strengthen their domestic manufacturing capabilities and reduce dependence on global supply chains, especially in strategic industries.  

So this round of tariff increases by the US may just be the beginning of more increases to come globally. And we have seen this play out before.

The US enacted sweeping tariff increases through the Smoot-Hawley Act in 1930.

Many countries protested, and a number retaliated with their own trade restrictions and tariffs.

This deepened and extended the Great Depression.

In some ways, today’s risks may be greater.

The new US tariffs, if fully enacted, are higher than the ones in Smoot-Hawley.

Trade is now a much bigger part of the American and global economy compared to the 1930s.

Supply chains are also more deeply connected than they were back then.

Any disruption to trade flows will have wider knock-on effects on the world.

This brings me to the third point, which is the impact on the global economy. Business and consumer confidence has already been hit by the tariffs. International trade and investments will suffer. Our economic agencies got in touch with several multinational enterprises and local businesses after the tariff announcement. Even those who were not directly affected by the tariffs are worried about weakening demand from their consumers. Some have put new projects on hold while they assess the full implications of the tariffs.

These are reactions from companies based here. But I am sure the same conversations are happening in boardrooms elsewhere.

Over the recent days, we have seen sharp negative reactions in global stock markets. It is too early to tell if all this will spill over into the real economy.

But the downside risks are clearly rising.

What is troubling is not just the tariffs themselves – which are already damaging – but the fact that this new wave of protectionism is unpredictable and unstable. Protectionism is already bad – unstable protectionism is even worse.

Businesses do not know what to expect. Many are holding back, fearful that changing rules will leave them with stranded assets.

And all this creates an environment of deep uncertainty – one that could tip both the US and global economy into recession.

The consequences extend far beyond economics.

More and more, countries are turning away from win-win cooperation and deeper integration.

Instead, we see a rising “me first”, win-lose mindset – where it is every country for itself. Some are even prepared to use aggressive or coercive means to get what they want at the expense of others.

Meanwhile, global institutions are getting weaker, and longstanding norms of cooperation are breaking down.

One major concern is the US-China relationship. America views China as a strategic competitor and threat, which must be dealt with now while America still has the advantage. China says it is ready for a tariff war, a trade war, or any other type of war. The US has now threatened an extra 50% tariff on China, and China says it will fight till the end. There are fewer channels for dialogue, which can serve as guard-rails to manage the relationship. So if the disputes escalate and destabilise US-China relationship, the consequences for the world would be disastrous.

We must be mentally prepared. The predictable and rules-based order we once knew is fading. The new era will be more volatile, with more frequent and unpredictable shocks. We must be ready to stand firm, and protect our interests, no matter how the external winds may blow.

What does all this mean for Singapore?

In the near term, we expect weaker global growth, which means external demand for our goods and services will fall.

The outward-oriented sectors of our economy will suffer the brunt of the impact. They include manufacturing, especially segments like electronics and semiconductors; biomedical science, which have higher export exposure to the US. Wholesale trade and transport will be impacted. The global uncertainty and dampened sentiments will also impact some services industries, including finance and insurance.

Singapore may or may not go into recession this year. But I have no doubt that our growth will be significantly impacted.

We had originally projected GDP growth of 1 to 3% for 2025. MTI is reassessing the growth forecast, and will likely revise it downwards.

Slower growth will mean fewer job opportunities and smaller wage increases for workers. And if more companies face difficulties or relocate their operations back to the US, there will be higher retrenchments and job losses.

For now, the measures announced in this year’s Budget will provide support for any short-term strain.

We have a comprehensive package of measures for households and individuals.

They will receive CDC vouchers, SG60 vouchers and U-Save rebates to help with their cost of living. And there are targeted measures like increased ComCare Assistance for the more vulnerable groups.

We are also supporting workers through investments in SkillsFuture. And those who find themselves involuntarily unemployed will receive help to get back on their feet through the SkillsFuture Jobseeker Support which will start later this month.

We have also rolled out measures in the Budget to help businesses – there are short-term support measures through corporate income tax rebates, as well as schemes to boost their productivity and competitiveness, and to pivot to new markets. Our economic agencies are also engaging the firms impacted by the tariffs to better understand their responses, and see how we can support them, and assist them with any specific issues they face.

Nevertheless, the situation is fluid and can change quickly.

We will therefore set up a Taskforce chaired by DPM Gan Kim Yong to help businesses and workers address the immediate uncertainties, strengthen their resilience, and better adapt to the new economic environment.

In addition to our economic agencies, the taskforce will include the Singapore Business Federation, the Singapore National Employers Federation, and the NTUC.

We will continue to monitor developments closely. The government stands ready to do more, if and when necessary. We have the resources to do so because of the financial discipline and prudence we have exercised over the decades.

In this new environment, Singapore must redouble our efforts to remain a key node in global flows, and a trusted business hub.

We will forge closer links with like-minded partners who share our commitment to open and free trade.

The US may have decided to turn protectionist. But the rest of the world does not have to follow the same path. We will identify other partners to join us and work around this – to ensure resilience and maintain critical parts of the multilateral system, while laying the foundations for a possible new and different global system that can be achievable later.

And this is why I have made the effort to engage and visit my counterparts in different countries. I touched base with the UK Prime Minister Keir Starmer yesterday and have a few more conversations lined up in the coming weeks. They are all keen to do more with Singapore, and to expand our economic cooperation including in new areas like the digital and green economies.

In particular we will strengthen our collaboration and integration within ASEAN.

Last Friday, I spoke with Malaysian Prime Minister Anwar Ibrahim. Malaysia is also the ASEAN Chair this year. We agreed to accelerate ASEAN’s integration efforts to make our region more attractive and competitive.

A Special ASEAN Economic Ministers’ Meeting will be convened later this week. They will discuss further ways that ASEAN can work together to strengthen intra-ASEAN Trade, and to send a strong signal of ASEAN’s commitment to regional economic integration.

As a group, ASEAN will also continue to strengthen our links with like-minded partners in areas of mutual interest.

Mr Speaker, we are entering a changed world. The only way Singapore can make it through the gathering storm is to stay united – pool our resources, our resilience and our resolve.

The government will do everything we can to steer Singapore through the choppy waters, and make sure no one is left behind.

We will keep our economy open, our society cohesive and our institutions strong.

We will create new value propositions for businesses and investors.

We will act boldly and decisively, when needed, to ensure Singapore continues to succeed.

Above all, we will put the interests of Singapore and Singaporeans at the centre of everything we do.

The road ahead will be harder. The dangers are real. But so too is our determination. In many ways, we are in a better position than we were sixty years ago when we became independent.

We have built deep reserves as a strategic buffer.

We have forged a strong compact, built on solidarity and trust in each other.

And most of all, we have our ingenuity and wit, our grit and gumption – a never say die spirit that has seen us through every crisis, and will carry us through the ones to come.

So Mr Speaker, I say to this House and to fellow Singaporeans – do not fear. Now, more than ever, we will stay resolute and united. Our little red dot will continue to shine. In a dark and troubled world, Singapore will hold our ground as a beacon of stability, purpose and hope.

Thank you Sir.