US tariffs spark urgent need for businesses to examine compliance, supply chain risk: SBF

SINGAPORE - Businesses will urgently need to look at compliance, supply chain risk, and how best to engage with government officials in countries they operate in, said the Singapore Business Federation (SBF) in the wake of sweeping US tariffs that took effect over the weekend, rocking the global economy and sparking recession fears.

“They will need to re-examine their reliance on the US as a market and consider whether there are market opportunities in the region and in the trade corridors where Singapore has free trade agreements,” SBF chief executive Kok Ping Soon said in a statement on April 9.

On April 9, US President Donald Trump

imposed a 104 per cent tariff on Chinese goods,

with Beijing retaliating on the same day by slapping on an additional 50 percentage points to bring the tariff on US goods up to 84 per cent.

To capture local businesses’ concerns, SBF’s Centre for the Future of Trade and Investment (CFOTI) said it will conduct a business survey on the impact of tariffs and hold workshops for them in April.

The statement added that advisers from the CFOTI could work with businesses to assess tariff impacts across their supply chains and explore mitigation strategies. These include product pricing adjustments, market diversification, alternative manufacturing hubs, and long-term supply chain resilience planning. 

Original equipment manufacturer parts exporter Outsource Asia Industries said its US business has fallen into limbo after US tariffs for Chinese products got ratcheted up to 104 per cent on April 9.

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. US customers account for 90 per cent of its business.

“We have 10 to 12 containers currently in the water and due to arrive in Houston and Boston in a few weeks. But we do not know the amount of tariff our US customers have to pay. We are not sure if the tariff applies on the date we shipped out of China, or on the date the shipment arrives in the US,” Mr T.K. Khor, Outsource Asia’s sales manager, told The Straits Times.

“Our US buyers are cutting back. I have had five phone calls with them today, advising us to let the dust settle first. Including a 30 per cent tariff from Trump’s first term, our US buyers may be hit with 134 per cent tariff,” said Mr Khor, whose firm makes guardrails, lifelines and roof anchors for the US construction industry.

SBF pointed out that even though Singapore has been hit with a 10 per cent minimum base tariff, which is the most favourable tariff rate levied, it is not immune to the effects of the higher tariffs imposed on other economies.

According to an SBF National Business Survey, 71 per cent of Singapore businesses have an offshore presence.

“Top markets including Malaysia, Indonesia and China have been hit with reciprocal tariffs ranging from 24 per cent to 34 per cent. Businesses that had pursued a ‘China + 1’ strategy in diversifying their supply chain to South-east Asia countries to supply to the US are now casualties,” SBF said.

Outsource’s Mr Khor noted that the “cat-and-mouse game doesn’t work any more”.

“During the first Trump administration, my US customers asked if we were moving our factory from China to Vietnam. We said no because of the uncertainty of doing business in Vietnam. Subsequently, our US customer found that even with the 30 per cent tariff at the time, it was more competitive to import from China than manufacture in the US,” he said.

“If we had moved to Vietnam, we would also be hit with tariffs today,” Mr Khor added.

The lack of clarity and predictability regarding these tariffs is a primary concern, said Mr Lennon Tan, president of the Singapore Manufacturing Federation (SMF).

“It seemed that certain sectors were initially spared, for example, the pharmaceutical sector. But today it was clarified that the tariff will also be applied. This uncertainty is causing many businesses to put their plans on hold,” he said.

Singapore’s key exports to the US include electronics and semiconductors, precision engineering components, petrochemicals and speciality chemicals, as well as biomedical and pharmaceutical products.

“The imposition of a 10 per cent tariff on these goods may lead to increased costs for US buyers, potentially making Singaporean products less competitive... However, Singapore’s focus on high-value and innovation-driven production helps to buffer some of the negative effects associated with tariff measures,” SMF said in response to ST’s queries.

Singapore firms exporting to other parts of the world may also be indirectly hit, it noted.

“For instance, Singapore manufacturers that supply components to China-based companies – many of which export finished goods to the US – are experiencing a drop in orders due to reduced demand. Additionally, global supply chain disruptions caused by trade tensions have led to fluctuations in the cost of raw materials and intermediate goods, affecting a wide range of sectors beyond just US-bound trade,” SMF said.

Association of Small and Medium Enterprises president Ang Yuit said local firms fear losing existing markets like the US, and potential competition from more foreign firms that, in a bid to avoid US tariffs, may set up shop in Singapore to tap the South-east Asian market. 

Ms Annie Gan, chairman of SCB Building Construction, believes the tariffs will likely have a significant impact on the global supply chain in the long run, but for now, the impact on small and medium-sized enterprises in the local construction sector is minimal.

“This may be because our raw materials are primarily imported, rather than exported. In the short term, prices of materials may even decrease as suppliers look for alternative markets to export to, such as Singapore. This could give us more negotiating power,” she said.

The US tariffs will spark a “seismic change in the way luxury goods like diamonds are traded”, according to a spokesman for the Diamond Exchange of Singapore.

Diamond dealer Suresh Hathiramani, also past president of and spokesperson for the Diamond Exchange of Singapore, sees a possible slowdown in diamond trading globally because the tariffs will raise prices significantly for buyers in the US, the biggest global market for diamonds and other jewellery.

“The profit margins are already so low on loose diamonds. With the new tariffs, the price of such diamonds, which are used for setting in various jewellery, will become unaffordable. For now, most retailers in the US are still well stocked and aren’t likely to raise prices significantly,” he said.

There is also great confusion over how the tariffs will apply, he added.

“Most cut and polished diamonds are exported from manufacturing centres in Africa, India and Belgium to the US and the rest of the world. That means the main value add is done in those manufacturing centres. Diamonds are also exported to jewellery setters and traders in Singapore, Hong Kong, Europe and Dubai, and then re-exported worldwide including to the US.

“So, if Singapore is re-exporting diamonds produced in India to the US, should the new 26 per cent tariff on Indian origin goods or the 10 per cent tariff on ex-Singapore goods apply? That is not yet clear ,” Mr Suresh said.

The Gemological Institute of America (GIA), which issues certification for diamonds, has asked clients outside of the US to temporarily stop sending diamonds for grading or other services to its US labs because of the new high tariffs, he said, citing a circular received from the institute.

“For the time being, GIA USA is redirecting diamonds and gemstones from abroad to its other labs in Dubai, Hong Kong, Botswana and Bangkok, because of a lack of clarity on tariffs for goods temporarily imported into the US for grading or verification. 

“No client will outlay the tariff first and then wait months for a refund. And who should do the paperwork? Is it the GIA or the client?” Mr Suresh said.