Singapore businesses flag return of uncertainty from US tariff moves

SINGAPORE - On paper, US President Donald Trump’s announcement of a 15 per cent tariff on all goods entering the country will raise costs for Singapore exporters.

Singapore is among a handful of countries around the world and the only one in South-east Asia facing an

increase in its US tariff rate, from 10 per cent to 15 per cent

.

Still, the overall impact on the Republic’s exports to the US “should be manageable”, as its key semiconductor and pharmaceutical exports remain exempt from tariffs, Ms Priyanka Kishore from consultancy Asia Decoded told The Straits Times.

Mr Ang Yuit, president of the Association of Small and Medium Enterprises, said most small and medium-sized enterprises (SMEs), which make up more than 99 per cent of registered companies in Singapore, will not be immediately impacted by the new tariffs as they do not directly export to the US.

However, “rapid-fire” tariff announcements in recent days have caused renewed business uncertainty, he said.

The US Supreme Court on Feb 20

struck down so-called reciprocal tariffs under the International Emergency Economic Powers Act

(IEEPA)

,

ruling that Mr Trump had overstepped his constitutional authority.

But the White House has since issued an order to impose a 10 per cent global tariff under Section 122 of the Trade Act. Mr Trump then announced in a Truth Social post on Feb 21 that the tariff rate will be raised to 15 per cent.

Mr Ang said the months ahead will be challenging for businesses, as “everyone thought that the tariff situation had stabilised, and they were getting used to where tariff levels were”.

“Everything pretty much changed overnight,” he added.

Singapore Business Federation chief executive Kok Ping Soon said early feedback from companies suggests that uncertainty is hurting business confidence more than the tariff rate itself.

He said: “Businesses can plan for a known cost increase, but they struggle when the target keeps moving, and some are holding back on major investment and routing decisions as a result.”

Section 122 permits the US president to impose temporary import tariffs or quotas to address serious balance-of-payments deficits, at rates not exceeding 15 per cent, for a maximum of 150 days. An extension would require Congress’ approval.

‘Businesses want certainty’

Manufacturer EP-Tec Solutions, which exports LED display screens from Singapore to the US, said higher tariffs will add to its cost pressures. Its group general manager Alex Lim said “a 5-percentage-point increase in the tariff can meaningfully affect pricing competitiveness, project budgets and procurement timelines in the US market”.

“In sectors such as education, retail and corporate environments, margins are already tight, and additional import costs may slow down purchasing decisions,” he said, adding that his firm is exploring strategies including diversifying its markets and moving certain manufacturing processes to the US if the higher tariff persists.

Even businesses with manufacturing facilities elsewhere in South-east Asia, which would benefit from lower tariff rates because of the US developments, have been hesitant to celebrate.

Furniture company Koda will face lower tariff costs as it manufactures most of its US-bound products in Vietnam.

Going by Mr Trump’s latest announcement, the company’s made-in-Vietnam exports to the US will be subject to a 15 per cent – instead of 20 per cent – general tariff. It will continue to pay a higher 25 per cent tariff on kitchen cabinets and upholstered furniture.

Although Koda faces a lower general tariff, its executive director Ernie Koh said: “This win may be short-lived as Trump is looking at other ways to impose tariffs that are more targeted at countries and sectors.”

Mr Koh said his business was already sharing some of the cost of tariffs with US retailers to help them mitigate increased prices, but “this tariff sharing has reduced significantly as new products are being developed and customers have priced tariffs into the new products”.

What has not yet been priced in is the uncertainty that changes to US tariffs will bring.

Mr Koh said: “With the Supreme Court ruling, the business environment again becomes very uncertain both in the short term and long term.

“Businesses actually want some level of certainty, regardless of how difficult the trading environment is. We can plan longer term in a certain business environment. We will just have to see in the coming months what the trading environment will be.”

What lies ahead

Global tariffs under Section 122 are set to go into effect for 150 days from Feb 24, 12.01am.

The US Customs and Border Protection agency will stop collecting tariffs imposed under the IEEPA, which have been deemed illegal, from the same time.

Mr Lennon Tan, president of the Singapore Manufacturing Federation, said the latest developments prove that the US tariff policies are dynamic, and businesses will need to adapt to navigate the changes.

He added: “At this juncture, it may not be suitable for businesses to craft long-term plans or investments in relation to the US market.”

Mr Tan hopes the Government will step in to help businesses negotiate for a longer period of adjustment to the new 15 per cent tariff rate. He also called for greater flexibility to the Market Readiness Assistance grant to cover more areas of expenses for internationalisation as the tariff situation develops.

Enhancements to the grant to provide a higher level of support to SMEs from April 1

were announced in

the Budget

, and will be applicable until March 31, 2029.

There is also uncertainty over whether Singapore businesses will be able to get tariff refunds.

Tariffs are paid by US importers, so any refund may go to them rather than Singapore exporters, Mr Tan said. He added that while Singapore companies may have given discounts to US importers to defray tariff costs, “this is often difficult to prove and recover even if rebates are available”.

Deputy Prime Minister Gan Kim Yong has said the Government will engage US counterparts to seek clarity on the implementation of a potential new 15 per cent tariff.

Singapore’s Ministry of Trade and Industry is seeking further details on the process for potential tariff refunds.

Singapore’s key semiconductors and pharmaceuticals exports are not subject to the upcoming Section 122 tariffs, as they may be the subject of Section 232 tariffs that have not yet been imposed.

Asia Decoded’s Ms Kishore said: “Looking ahead, the risk profile may have shifted somewhat. With its ability to impose sweeping tariffs across countries curtailed, the Trump administration is likely to lean more heavily on targeting sectors.

“The absence of a deal with Washington on future Section 232 tariffs and other sectoral measures could gradually erode Singapore’s tariff advantage in the US market, if competitor economies pivot to such arrangements.”