[SINGAPORE] Over the years, we have weathered numerous global crises. From the Asian financial crisis to the global financial meltdown, through Sars, and most recently, the Covid-19 pandemic – every time something shook the world, we held firm. We tightened our belts, stayed resilient, and pulled through. And each time, we emerged stronger. That gives us confidence today. But it is crucial to recognise that in each of those past episodes, two major factors worked in our favour.
First, domestically, we responded decisively. We pulled together as one people. We were disciplined, we made tough policy decisions where necessary, and we adapted our systems and society to stay afloat and recover. That ability to get our act together quickly and effectively made a significant difference.
Second, and just as important, was the global environment. Singapore was always part of a functioning global economic order. This system enabled the free flow of goods, capital, and talent. Multinational corporations sought out competitive, reliable locations, and Singapore fit the bill. Each time we were hit by crisis, we could reintegrate quickly into global trade and investment flows, reboot our economy, and get back on the growth path.
This framework was upheld by international rules and institutions, like the World Trade Organization (WTO). It ensured fairness – big or small, all countries played by the same rules. That level playing field allowed Singapore, despite our size and lack of natural resources, to punch above our weight in global trade and services.
Take for example a situation where the EU raises tariffs on Japanese cars to protect European automakers. WTO rules require the same tariff to be applied to all other countries – whether it’s China, India, or the United States. If Singapore were in the car export business, we’d be treated no differently. Conversely, if a country like Australia offers a tariff-free deal on rice from India, WTO rules mean they must extend the same to rice from every other country. That principle is called Most Favoured Nation (MFN), and it prevents countries from cherry-picking partners and playing favourites.
This system of impartiality and predictability has been especially critical for small states like Singapore. With rules we could rely on, we carved out a competitive edge through efficiency and trustworthiness. We became a key node in global value chains, in finance, in high-end manufacturing. But now, that foundation is under threat.
The difference this time is stark. The United States no longer wants to abide by MFN principles. It is pushing to replace it with a system of reciprocal tariffs – one where every relationship is negotiated bilaterally, and terms vary based on bargaining power. It’s not a multilateral table anymore; it’s arm wrestling. One-on-one, strength against strength.
What Washington is pursuing is not a win-win setup. It is a zero-sum game – where one side must lose for the other to gain. That changes the nature of the global order fundamentally.
Why is this alarming for the world? Firstly, having different rules for different countries will hurt smaller nations the most – they lack the leverage to negotiate favourable terms. Even bigger economies will suffer, as the resulting patchwork of conflicting trade regimes creates chaos and uncertainty. Businesses will find it harder to plan, invest, and grow across borders.
The consequences are already taking shape. Major firms are reevaluating where to locate operations. Supply chains – once structured for efficiency – are being reshuffled based on political and strategic interests. Some governments are stockpiling essential resources or propping up local firms at the expense of open markets. These are signs that we’re moving toward a more divided global economy.
Secondly, rising tariffs – especially unequal ones – will strangle trade, raise consumer and business costs, and dampen global economic momentum. Just two decades ago, average US tariffs were around 1 per cent. Today, they hover around 10 per cent – the highest in 80 years.
If the next round of reciprocal tariffs is implemented, we could see US tariffs spike to 30, 40, even 50 per cent – surpassing levels seen before the Second World War, during the Great Depression. Those high tariffs back then worsened the economic slump not only for America but for the world.
To make matters worse, the US tariffs so far have largely excluded two key sectors: pharmaceuticals and semiconductors. That protection may soon disappear. Washington has signalled clearly that these sectors are next in line. This could severely affect Singapore, where pharmaceuticals and semiconductors form a significant portion of our export base. The immediate impact could be sharp and painful.
And when other nations retaliate, as they already have – especially China – a spiral of tit-for-tat tariffs follows. That leads to fragmentation and contraction. The global economy becomes a battlefield, not a marketplace.
Experts warn that this fragmentation could eventually divide the world into separate economic blocs – each with its own trade rules and technologies. Such a world would be more expensive to navigate, less efficient, and far more difficult to coordinate in global emergencies – whether it’s another pandemic, a climate crisis, or a banking collapse.
Fourthly, the disruption to industries would be severe. Tariffs of 100 per cent or more can destroy entire business models overnight. A Chinese factory exporting Christmas decorations to the US would be rendered unviable. In Singapore, if such tariffs hit semiconductors or pharma products, entire segments of our economy could be upended. Companies would face uncertainty, jobs could be lost, and the broader economy could slide toward recession.
Fifth, once tariffs go up, they rarely come down quickly. Protectionist policies, once implemented, tend to stick around. They become politically popular among special interest groups, even if they hurt the economy in the long run.
This is known as “tariff hysteresis” – the tendency of trade barriers to persist long after their original justification has faded. Over time, they entrench inefficiencies and weaken competitiveness. And while protectionism may sound appealing in the short term, history has shown that it leads to stagnation, not prosperity.
Impact on Singapore? Most immediately, it affects growth. We had forecasted growth between 1 and 3 per cent earlier in the year. With these global headwinds, the Ministry of Trade and Industry has revised that estimate to between 0 and 2 per cent. There is no certainty. Could it be zero? Yes. Could we see negative growth? A recession? It’s possible.
But GDP figures only tell part of the story. We must also watch for knock-on effects – whether on jobs, investments, or long-term competitiveness. Investors may hesitate, scale back, or shift their focus elsewhere. Export-driven industries may see demand fall. Small and medium enterprises that rely on cross-border networks could face financial strain. These impacts could build up slowly, but they would be real and painful.
In past crises, we could rely on the world to recover, and we would rejoin that recovery. This time, however, while we may remain stable, the global environment itself could stay troubled. That’s what makes this moment different – and more dangerous. And that is why we must prepare ourselves to navigate through this more turbulent world.
WhatsApp
Instagram
Threads
