Analysts say the impact would be cushioned by other factors, but could worsen if more countries are targeted by US tariffs.

A general view of the Pulau Brani port terminal in Singapore on Jul 3, 2024.

Singapore’s open, trade-dependent economy could face slower growth and weaker business sentiment, even though it is not directly targeted by the latest US tariffs announced over the weekend.

Analysts said on Monday (Feb 3) that the 10 per cent tariffs on Chinese goods will have a greater impact on Singapore than the 25 per cent tariffs on Canadian and Mexican imports.

US President Donald Trump announced on Saturday that these tariffs would remain in place until a national emergency over the drug fentanyl and illegal immigration to the US is resolved. However, the White House did not clarify what specific actions the three affected countries would need to take.

While President Trump has previously threatened tariffs, some were surprised by how quickly he implemented them.

Mr Mansoor Mohi-uddin, chief economist at the Bank of Singapore, said many had expected “lengthy negotiations” between the US and its key trading partners in the first few months of the year.

“The consensus was that expected US tariffs would only threaten the economic outlook in the second half of 2025,” he said.

DAMPENING EXPORTS

Given Singapore’s small size and high dependence on trade, its economy has limited options if US tariffs slow global trade and growth, analysts said.

Reduced US imports would likely dampen Singapore's export growth, according to Mr Ray Farris, chief economist at Eastspring Investments. The uncertainty surrounding global trade could also weaken business sentiment.

Ms Sheana Yue, an economist at Oxford Economics, pointed out that business investment in Singapore is closely linked to exports.

“We suspect business sentiment will sour over the coming quarters,” she said.

However, she does not expect a severe slowdown. “Our modelling suggests GDP will slow by only 0.4 per cent from our baseline in Q1 2026,” she added.

Mr Brian Lee, an economist at Maybank Securities, highlighted that Singapore's outlook is supported by easing monetary conditions, the construction of major infrastructure projects and an expected “generous election Budget”.

Singapore’s Budget statement will be delivered on Feb 18, and the General Election must be held by Nov 23.

“We are projecting 2025 GDP growth slowing to 2.6 per cent from the 4 per cent flash estimate in 2024 – our forecast lies at the upper end of MTI’s 1 per cent – 3 per cent range,” he said.

TARIFFS ON CHINA TO HAVE BIGGER IMPACT

China, one of Singapore’s largest trading partners, is expected to feel the brunt of US tariffs, which will in turn affect Singapore. 

North American trade is largely contained within the US, Canada and Mexico, said Mr Mohi-uddin, whereas a drop in China's exports to the US could reduce Chinese demand for goods and services from the rest of Asia.

Ms Yue said Singapore’s trade volume with China is 20 times larger than its combined trade volume with Canada and Mexico. 

As Singapore’s other trade partners also have strong ties with China, the ripple effects could be significant. 

“The US is also likely to scrutinise Singapore’s relationship with China, especially following news of Nvidia chips being procured illegally by DeepSeek in Singapore,” she added.

WHAT IF THE TRADE WAR WIDENS?

While President Trump has “fired the starting gun” on a broader trade war, Mr Mohi-uddin suggested that the US may still negotiate fresh agreements with its trading partners, potentially avoiding a prolonged conflict.

However, Ms Yue believes a trade war has already begun, as Canada and Mexico have announced retaliatory tariffs on US goods.

“If tariffs are widened, the key impact on Singapore will be a hit to exports,” she said, adding that investment decisions and economic growth would also be affected.

Mr Farris of Eastspring Investments said that if the US imposes tariffs on Southeast Asian countries where Chinese companies have relocated operations, Singapore could feel the impact as it services these exports.

“This certainly feels like the beginning of a new period of trade tension,” he said. “If it escalates and sustains it will depress global trade which will clearly hurt Singapore.”