S’pore factory activity rises even as US imposes tariffs on pharmaceuticals

SINGAPORE - Singapore’s manufacturing output picked up in September even as the Trump administration added pharmaceuticals, a major export from the Republic to the US, to its list of goods under tariffs.

Experts said the impact of

the 100 per cent levy, which took effect on Oct 1,

is likely to be limited as most large pharmaceutical companies here are building factories in America and could be exempted from the tax.

US pharma giant Pfizer, for instance, received a three-year reprieve from the sectoral tariff earlier this week. It is the biggest contributor to Singapore’s pharmaceutical manufacturing output.

The purchasing managers’ index (PMI) – a barometer of the overall manufacturing industry’s health – rose from 50 points in August to 50.1 points.

The electronics sector, which accounts for 40 per cent of manufacturing output, recorded a PMI of 50.7 points, marking its fourth straight month of expansion.

A PMI reading above 50 indicates growth; one below suggests a contraction in output.

The monthly survey, which is gathered and compiled by the Singapore Institute of Purchasing and Materials Management (SIPMM), did not offer a separate snapshot for the pharmaceutical sector.

The sector accounts for around 13 per cent or US$4 billion (S$5.2 billion) of exports from Singapore to the US.

“Despite numerous challenges of uncertain global trade policy and sectoral tariffs, the outlook of the Singapore manufacturing business remains positive as demand has started to build up towards the year-end festive season,” said SIPMM executive director Stephen Poh.

DBS Bank senior economist Chua Han Teng took a more cautious view. He said that although PMIs have edged up, they were lower than readings issued at the start of 2025, suggesting that manufacturers are contending with a volatile economic landscape and the risk of softening external demand.

He said firms were also dealing with “persistent uncertainty surrounding new rounds of US sectoral tariffs”.

He added that even if more pharmaceutical companies secure tariff reprieves, “existing muted business sentiment would still be negatively affected”.

US President Donald Trump, in announcing the tariff on Truth Social on Sept 25, said the levy on branded and patented products will not apply to firms building factories in America if “construction has started”.

He has since granted Pfizer, which has committed to growing its manufacturing in the US, a three-year exemption from the levy.

The company has also agreed to slash some of its US drug prices, and sell directly to American consumers and businesses.

Several pharmaceutical firms told The Straits Times that they expected to be similarly insulated from US tariffs because of their American manufacturing pledges.

Pfizer opened a new 429,000 sq ft plant in Singapore

in July 2024 to produce active pharmaceutical ingredients – the biologically active component of a drug – for its cancer, pain and antibiotic medicine.

The state-of-the-art facility is an extension of its two-decade-old manufacturing site in Tuas Biomedical Park.

Pfizer did not respond to queries on whether the threat of tariffs will change how it approaches investments beyond the US.

Deputy Prime Minister Gan Kim Yong has said pharmaceutical companies that plan to invest in the US

remain committed to grow in Singapore,

although tariff fears could raise competition for investment dollars in the long run.

Countries that have made deals with the US could choose to put future investments there instead of in Singapore or the region, he had said.

Tariffs will apply only to physical product flows. As a result, Singapore’s role as a research and development hub for pharmaceuticals will be unaffected, said Insead’s Assistant Professor of Technology and Operations Management Xinyu Liang.

“In fact, with recent regulatory pullbacks and increased uncertainty in the US clinical trial environment, Singapore is becoming even more attractive for global trial sponsors seeking clarity and consistency,” she said.

Antiviral drug developer Gilead Sciences told ST that it remains committed to Singapore with an office supporting therapeutic areas like virology, oncology and cell therapy.

The company said: “These efforts reflect Gilead’s ongoing commitment to public health and innovation in the Singapore market.”

Meanwhile, insulin and weight-loss drugmaker Eli Lilly pointed to its

establishment of a $42 million innovation hub in Singapore

in November 2024, to accelerate the research and development of AI-powered digital health technologies.

“This cutting-edge initiative forms the basis of a five-year plan, supported by the Economic Development Board,” a company spokesperson said.

However, the spokesperson added: “As a US company, Lilly is committed to expanding manufacturing capacity in the US to grow our economy and bring high-paying jobs to American workers.”

The biomedical sciences industry, which comprises the biopharmaceutical and medical technology sectors, is a key contributor to Singapore’s economy.

In 2023, it accounted for 2.6 per cent of Singapore’s gross domestic product and manufactured close to $38 billion worth of products for the global market.

However, monthly manufacturing output numbers for biomedical manufacturing are traditionally volatile, as production is mostly done in batches, with downtime needed for the maintenance of equipment.

Tariffs are already causing firms to tweak their pharmaceutical supply chains, which could hit local manufacturing, said Prof Liang.

“What we’re observing now is a hybrid approach among companies: keeping active ingredient production and other complex manufacturing steps in Singapore, but shifting final dosage and packaging for the US market either to the US itself or to tariff-neutral jurisdictions,” she said.

Mr Damien Duhamel, Eurogroup Consulting’s managing partner for the Middle East and Asia, expects more companies to adopt a “dual-site” strategy – being “US for US, and Singapore for Asia, Oceania and some parts of the Middle East”.

Asia will continue to have an edge in active pharmaceutical ingredient (API) manufacturing, which is not cost-effective in the US, said Singapore Management University’s Lee Kong Chian Professor of Operations Management Shantanu Bhattacharya.

He said: “Since there is very little manufacturing of chemicals in the US, the economies of scale of manufacturing API chemicals only for the pharmaceutical sector is low, translating to higher manufacturing costs. These economies of scale are very high in Asia, specifically in China and India.

“The other obvious factor is the labour cost, which is much higher in the US compared to Asia.”

The latest PMI survey also showed a faster expansion rate in the indexes of new orders, new exports, and input purchases.

The factory output index expanded, after five straight months in contraction territory. However, the employment index stayed in contraction.

Singapore’s readings stand in contrast to regional PMIs, which “looked mixed in September 2025 amid a fragile trade landscape pressured by tariffs”, DBS’ Mr Chua said.

Japan and Taiwan saw manufacturing activity shrink, while an official survey showed that output in China contracted for the sixth month.

US factory activity shrank for the seventh consecutive month as factories grappled with the fallout from tariffs.