Trump tariff nightmare continues to plague markets as US dollar plunges on trade war, recession fears

SINGAPORE - Singapore stocks plunged 8.2 per cent this week and the US dollar sank as investors struggled to deal with an intensifying trade war between the United States and China, the world’s two largest economies.

A midweek respite after US President Donald Trump

announced a 90-day timeout on his tariff barrage

failed to last.

Instead, the Asia markets rally on April 10 turned the next day into what traders call “sell the rip”. This refers to selling an asset after a rapid price increase to capture profits before the price falls – the opposite of “buy the dip”.

Analysts said that while the tariff pause and the start of bilateral negotiations between the US and some trading partners was a welcome development, it does not give enough clarity on the risks that listed companies and the global economy are facing from the hit to consumers and the damage to supply chains.

Also, the pause does not address the elephant in the room –

the US-China tit-for-tat trade war

that now seems to be feeding on itself. Both the US and China are key sources of trade and investments for Singapore and most Asian economies.

China again struck back against US tariffs by raising its levies on US goods to 125 per cent from 84 per cent. This, after Mr Trump on April 10 raised duties on China to a staggering 145 per cent.

However, Beijing said it would ignore any further moves by Mr Trump because it no longer makes economic sense for importers to buy from America, and any more US tariffs “will become a joke in the history of world economy”.

Ms Erica York, a vice-president at the Tax Foundation’s Centre for Federal Tax Policy, told CNBC that Mr Trump’s tariffs essentially cut off most trade with China.

“As things stand, the worst of the sentiment deterioration could be behind us, with market participants now watching to see what would happen in the next 90 days,” said Mr Eugene Leow, senior rates strategist at DBS Bank.

But he added: “It is unclear how much real economic damage the acute market stresses have wrought.”

Singapore’s Straits Times Index closed down 1.8 per cent

at 3,512.53 points on April 11 before news that China announced its retaliation.

The battered Singapore stock market – which suffered its worst day since the 2008 global financial crisis this week – reflects investor worries over the threat to Singapore’s trade-driven economy from a potential tariff-induced global recession.

Singapore is a key financial and transshipment hub, and a critical supplier of semiconductors, pharmaceuticals, petrochemicals and transport engineering goods such as aircraft engines, and offshore rigs and platforms.

The semiconductor and pharmaceutical sectors – which together account for the bulk of Singapore exports to the US – are also in Mr Trump’s tariff cross hairs.

Around the world, markets were flashing red as steep sell-offs hit US assets – stocks, dollar and bonds – on recession fears.

The US dollar extended its slide on April 11 as the escalating tariff war continued to undermine the currency’s status as a safe haven in times of stress.

The Bloomberg Dollar Spot Index, which measures the greenback against six main peers, fell 1.2 per cent, after sinking 1.5 per cent the day before, its biggest plunge in three years.

Against the Singapore currency, the US dollar tumbled 1 per cent to 1.3172 as at 5.44pm local time. At this level, the Singapore dollar has gained 3.1 per cent to date this year.

Tariffs were expected to boost the US dollar, but instead the currency has fallen more than 7 per cent since Mr Trump’s inauguration in January, and more than 2 per cent since he unveiled global tariffs on April 2.

The sell-off in US Treasuries picked up pace on April 11, with the 10-year note yield rising to 4.45 per cent, gaining about 45 basis points in the week, the biggest increase since 2001, LSEG data showed.

The rising yields threaten to deal the US economy another jolt by pushing up the cost of borrowing across the financial system.

Analysts said that the US and China, with a combined gross domestic product of US$46 trillion (S$61 trillion), are locked in a game of chicken in which no one will be left unscathed.

“The tariff drama is not over by any means,” said Ms Selena Ling, chief economist and head of global markets research and strategy at OCBC Bank.

“Both the US and China are digging in their heels. So, while hopes for a negotiation remain, the real economy will likely continue to reel from the heightened uncertainties and market volatility,” she added.

Dr Chua Hak Bin, regional co-head of macro research at Maybank, said: “The US-China tariff wall has climbed to a prohibitive level that will almost dry up all bilateral China-US trade activity.”

He added that with sectoral tariffs on semiconductors and pharmaceuticals still hanging in the balance, companies across the world, including in Singapore, will likely have little confidence to make decisions on investments and hiring in the near term.

“Companies will likely pause and wait for greater clarity on the new tariffs before committing to major new investments,” Dr Chua said.

For Asian businesses highly integrated into Chinese supply chains, the pain is deep and ongoing.

Earlier this week, original equipment parts exporter Outsource Asia Industries told The Straits Times that its US business has fallen into limbo.

The Singapore firm, which exports construction safety equipment from its partner’s factory in China to the US and Canada, said its US customers have asked to delay shipments that are not already en route for now.

Analysts said financial markets’ reactions tend to be faster but are usually transient. For businesses, the landscape is way more complex.

“Singapore, like the rest of Asean, has close economic linkages with both the US and China, whether in trade, foreign direct investment or portfolio flows,” said Ms Ling, adding that Singapore will have to navigate the choppy waters.

On April 14, the Ministry of Trade and Industry will likely cut its forecast for Singapore’s 2025 economic growth from its current 1 per cent to 3 per cent range, when it releases the first-quarter advance estimates.

Prime Minister Lawrence Wong has warned that growth this year will be “significantly impacted” and Singapore could tip into a recession.

On the same day, the Monetary Authority of Singapore is expected to further

reduce the pace of the Singapore dollar’s trade-weighted appreciation,

given the Trump tariffs’ risks to growth.