Cloud of uncertainty from US tariffs has cleared, boosting business confidence: DBS

SINGAPORE – When US President Donald Trump announced tariffs on virtually every country in the world in April on “Liberation Day”, it cast a cloud of uncertainty over businesses.

“The conversations that we had with companies were – this is causing a lot of disruption. We do not know where tariffs will land,” DBS group executive and group head of institutional banking Han Kwee Juan said in an interview with The Straits Times.

But much of the impact from tariffs and lower interest rates has already been priced in, while recent improvements in the geopolitical climate are giving companies clearer visibility to plan and execute their next moves.

“Companies want to grow and invest, they just need predictability. Now, they have greater clarity on the direction of travel for rates and tariffs,” Mr Han said.

One of the key factors driving renewed investment interest is lower US interest rates. The US Federal Reserve has made two interest rate cuts so far in 2025, with the

most recent cut announced on Oct 29

, when it lowered its key lending rate by a quarter of a percentage point to a range of 3.75 per cent to 4 per cent.

This has contributed to an inflow of capital into the Republic, Mr Han said. “With the amount of money coming in and the liquidity that we see, rates will continue to be at this level or even slightly lower as we head into 2026.

“That in itself should be good news for companies because it lowers their cost of doing business. We are hopeful that rates will change some of their thinking around investments, and help restart some of the investments they may have held back.”

Market confidence appears to have returned, with the Singapore Exchange recording an uptick in initial public offering (IPO) activity in 2025, Mr Han said.

Singapore’s IPO momentum

has picked up pace

in 2025 with seven mainboard listings so far and more in the pipeline.

The Republic also placed ninth on a recent Bloomberg ranking of the world’s top IPO venues, overtaking markets including London.

This sentiment was recently echoed by Singapore Business Federation vice-chairman Mark Lee, who observed that local companies were no longer holding back on investments and were taking a “small steps approach”. This means they are making “small bets on areas of diversification of their supply chain, ensuring that they have alternatives to suppliers, markets as well as manufacturing sites”.

Mr Han said that through the Covid-19 pandemic and current environment of tariffs, businesses have learnt that they can no longer rely on the strategy of producing goods in countries with the lowest cost before selling them internationally.

Major companies like Apple, which has large factories in Asia, have made pledges to increase manufacturing in America in the face of tariffs, while governments in China, India and the Gulf Cooperation Council – a political and economic alliance of six Gulf states – are also demanding that foreign companies invest and build their capabilities onshore.

“These are the things that essentially cause companies to have to rethink how they are setting up, and how they deal with movement of capital goods and people,” Mr Han said.

To increase resiliency, businesses headquartered in the US or Europe are considering moving pools of working capital into regions like Asia where they operate, instead of centralising their liquidity in the West, he observed.

In addition, they are setting up international headquarters with sufficient financial heft to function independently without support from the parent company. This gives entities the ability to secure financing or be sold for strategic reasons, Mr Han said.

DBS has been engaging firms to advise them on their operations, including suggesting new locations and platforms to help them finance their entire supply chains.

Mr Han said businesses like e-commerce platforms have tapped the DBS GlobeSend payment solution, which uses smart routing and real-time exchange rates, allowing money to be sent with ease.

The bank expects Asean to remain a location of choice for production, for both Western and Chinese businesses, over the next decade. This is despite US pressure on the region to stop Chinese transshipments, in which goods are routed through other countries on their way to the US in a bid to pay lower tariffs.

China’s outbound direct investment into Asean is expected to have a compound annual growth rate of 10 per cent over the next 15 years, reaching an approximate $130 billion by 2040, according to the bank’s projections.

Mr Han said: “Resilience will be critical in 2026. Growth is expected to moderate, and volatility may persist as global supply chains, trade flows and capital markets adjust to a new equilibrium. Firms have learnt that resilience rests on optionality, agility and speed – the capacity to respond and reposition quickly as conditions evolve.”