Escalating trade tension between China and the United States has sparked concerns among the business community here over the potential impact on global growth.
The tit-for-tat measures announced by the two global powers are fuelling fears of a protracted trade war, which would be bad news for Singapore's small, open economy.
A Ministry of Trade and Industry spokesman noted: "An escalating cycle of expanding tariff measures will have a ne-gative impact on international supply chains, and trade and global growth."
Singapore Business Federation chief executive Ho Meng Kit is urging companies facing difficulties with the trade dispute to contact the federation. "When trade policies are uncertain, it is very important for our companies to know how to use our free trade agreement network to provide them with better stability and predictability," he added.
But there is a silver lining: Some trade diversion could occur, with importers from the US and China looking to suppliers elsewhere.
If the tariff measures are implemented to the letter, regional exporters, particularly in Malaysia, Singapore and Thailand, would be well placed to benefit from the displacement of demand for certain product categories such as machinery, chemicals, aircraft parts, rubber tyres and medical equipment, CIMB economists Michelle Chia and Lim Yee Ping said in a research note.
"However, some sectors will also face disruptions in the supply chain for intermediate or capital goods that are exported directly or via other countries to China, and eventually destined for the US," they noted.
Singapore-listed commodity firms saw a knee-jerk reaction in their stock prices following the tariff announcements.
Global commodities trader Olam fell 4 per cent to $2.22 on Wednesday from Monday's close at $2.32. Agribusiness group Wilmar International's stock price also declined 4 per cent over the same period to reach $3.08 on Wednesday.
Both stocks recovered slightly yesterday.
Wilmar said it was still assessing the impact of the tariffs.
The Trump administration took a hit at China on Tuesday with a proposed list of more than 1,300 exports that would face a 25 per cent tariff. About US$50 billion (S$65.7 billion) worth of imports from China could be affected. China struck back with its own list of 106 American goods - also worth US$50 billion - which could be subject to tariffs.
"China has toughened its rhetoric and made reciprocity its response. But it remains open to talks with the US - the key question is whether the US will bite," said OCBC economist Selena Ling. "The risk of an outright trade war has escalated, so the next few months will be tricky, if not choppy."
