The United States and China have agreed to ease tensions on their trade war earlier today (21 May).
Earlier this year, the Trump administration had imposed tariffs on solar panels, washing machines, steel and aluminium imports. This sparked China to retaliate by slapping additional tariffs on 128 US imports that are estimated to be worth around US$3 billion, sparking many economists to label this as a “trade war” between the 2 economic giants.
Minister Chan says that tariffs would have a “limited” impact on Singapore’s economy
In response to this potential trade war, Member of Parliament for Ang Mo Kio GRC Gan Thiam Poh asked in Parliament (18 May) whether there would be any impact on Singapore’s economy and businesses, and if there would be any change on Singapore’s economic strategy.
Minister for Trade and Industry Chan Chin Sing replied that the trade war between US and China would have a “limited” impact on Singapore’s economy.
The 4G leader said that Singapore’s domestic exports to the US were limited given the “modest share that the [affected products] have as a percentage of Singapore’s total domestic exports” before saying that “the direct negative impact of the US tariffs on the Singapore economy is limited”.
In 2017, Singapore’s domestic exports to the US totalled S$4.6 million for steel and S$7.1 million for aluminium. Compared to the total amount of exports, these made up a mere 1.4% of Singapore’s total domestic exports to the US, and 0.09% of Singapore’s total domestic exports to the world.
The former army general added that Singapore is “closely monitoring developments on these safeguard measures, which do impact some companies in Singapore” and have “registered our concerns with the relevant US departments and consulted with the US on possible exemption from the safeguard measures”.
Chan’s answer at that point in time may be too simplistic compared to that of his Cabinet colleague Heng Swee Keat.
Minister Heng shows that his understanding on trade issues is more comprehensive when compared to Minister Chan
Just 2 weeks earlier at the ASEAN+3 Finance Ministers’ and Central Bank Governors’ meeting (5 May), Minister Heng Swee Keat gave more comprehensive insights into the topic. While Chan said that the impact would be “limited”, Minister Heng has said that the impact of a trade war would make everyone a “loser”.
The seasoned economist said that the “global economy is so much more integrated now” and any action by the major economies “can have a very big knock-on effect on everyone else”. He added that we “cannot escape the negative effects of a trade war simply because… any action will affect all of us”.
This line of reasoning was consistent with what he has said three days back at the ASEAN Conference 2018 (3 May). He had then noted that trade issues are “extremely complex” and countries need to adjust so that they are not left behind.
He said that “in many parts of the world where people are against free trade… the losers felt very aggrieved that the system has not served them well. And this is something which all countries, including Singapore, must be very conscious of, that we have to ensure that our people can benefit from this free trade”
Economists seem to agree with this.
According to Mizuho Bank economist Vishnu Varathan, the US tariffs on steel and aluminum could spread to manufactured goods and affect the supply-chain effects which has an impact on Singapore. He said that the markets could “worry too much” with a sell-down potentially hurting Singapore via financial linkages and a loss of confidence.
Minister Heng then added that Singapore is putting in effort to grow as a hub for technology and enterprise.
“In my new role as the chairman of the National Research Foundation, I will be looking at this issue closely and look forward to any suggestions that you have, how we can grow our technology capability and to partner businesses in deploying technology for innovation, deploy technology to scale businesses”.
Looking at the quality of answers given by these two contenders for premiership, who do you think has a better understanding of how the economy works?